Basic Income Guarantee: Your Right to Economic Security [2012 ed.] 113700570X, 9781137005700

Table of contents :
Cover
Half-Title
Title
Copyright
Contents
List of Tables
Preface
Acknowledgments
Prologue
1 Introduction: It’s Time to Think BIG
2 So What’s the BIG Idea?
3 Why Did We Lose the War on Poverty?
4 Did You Know?
5 Why Are Jobs Not the Answer?
6 Why Is There So Much Inequality in the United States?
7 How Do Other Countries Handle Economic Security?
8 Why Should the United States Adopt a Basic Income Guarantee?
9 Is a Basic Income Guarantee Moral?
10 Why Should I Work to Support Welfare Chiselers?
11 Why Not Guarantee Everyone a Job?
12 Why Not Try Other Programs?
13 Can the United States Afford a Basic Income Guarantee?
14 Will a Basic Income Guarantee Work?
15 Has the Basic Income Guarantee Ever Been Tested?
16 What about the Work Ethic?
17 What Will Life Be Like under a Basic Income Guarantee?
18 Will a Basic Income Guarantee Threaten Democracy?
19 How Is a Basic Income Guarantee Administered?
20 What’s Happening with BIG around the World?
21 Can America Be Convinced?
22 Realistically, What Are the Chances for a BIG in the United States?
Appendix A The Cost of a Basic Income Guarantee
Appendix B Current Social Welfare Programs
Appendix C A Brief History of a Basic Income Guarantee
Appendix D Alternate Forms of a Basic Income Guarantee
Appendix E Resources
Appendix F Suggested Reading
Notes
Index

Citation preview

Basic Income Guarantee

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Exploring the Basic Income Guarantee Basic income is one of the most innovative, powerful, straightforward, and controversial proposals for addressing poverty and growing inequalities. A Basic Income Guarantee (BIG) is designed to be an unconditional, government-ensured guarantee that all citizens will have enough income to meet their basic needs. The concept of basic, or guaranteed, income is a form of social provision and this series examines the arguments for and against it from an interdisciplinary perspective with a special focus on the economic and social factors. By systematically connecting abstract philosophical debates over competing principles of BIG to the empirical analysis of concrete policy proposals, this series contributes to the fields of economics, politics, social policy, and philosophy and establishes a theoretical framework for interdisciplinary research. It will bring together international and national scholars and activists to provide a comparative look at the main efforts to date to pass unconditional BIG legislation across regions of the globe and will identify commonalities and differences across countries drawing lessons for advancing social policies in general and BIG policies in particular. Series Editors: Karl Widerquist is a visiting associate professor of Philosophy at Georgetown University-Qatar. James Bryan is an associate professor of Economics at Manhattanville College. Michael A. Lewis is an associate professor at Hunter College School of Social Work. Basic Income Reconsidered Simon Birnbaum Alaska’s Permanent Fund Dividend Edited By Karl Widerquist and Michael W. Howard Basic Income Guarantee Allan Sheahen

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Basic Income Guarantee Your Right to Economic Security

Allan Sheahen

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BASIC INCOME GUARANTEE

Copyright © Allan Sheahen, 2012. All rights reserved. First published in 2012 by PALGRAVE MACMILLAN® in the United States— a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–1–137–00570–0 Library of Congress Cataloging-in-Publication Data Sheahen, Allan. Basic income guarantee : your right to economic security / by Allan Sheahen. pages cm.—(Exploring the basic income guarantee series) ISBN 978–1–137–00570–0 (hardback) 1. Guaranteed annual income—United States. 2. Public welfare— United States. 3. Economic security—United States. I. Title. HC110.I5S488 2012 331.2⬘36—dc23

2011051390

A catalogue record of the book is available from the British Library. Design by Newgen Imaging Systems (P) Ltd., Chennai, India. First edition: July 2012 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America.

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Pr ev ious P u bl ic at ions

Guaranteed Income: The Right to Economic Security (1983)

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A Basic Income Guarantee (BIG) is a government program to ensure every citizen’s basic economic security. All Americans would receive, without means test or work requirement, an income sufficient for food, shelter, and basic necessities. “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care, and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age, or other lack of livelihood in circumstances beyond his control.” —Article 25 of the Universal Declaration of Human Rights of the United Nations

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C on ten ts

List of Tables

ix

Preface

xi

Acknowledgments Prologue

xiii xv

1

Introduction: It’s Time to Think BIG

1

2

So What’s the BIG Idea?

3

3

Why Did We Lose the War on Poverty?

7

4

Did You Know?

13

5

Why Are Jobs Not the Answer?

19

6

Why Is There So Much Inequality in the United States?

31

7

How Do Other Countries Handle Economic Security?

49

8

Why Should the United States Adopt a Basic Income Guarantee?

55

Is a Basic Income Guarantee Moral?

61

10

Why Should I Work to Support Welfare Chiselers?

67

11

Why Not Guarantee Everyone a Job?

71

9

12 Why Not Try Other Programs?

79

13

Can the United States Afford a Basic Income Guarantee?

85

14

Will a Basic Income Guarantee Work?

97

15

Has the Basic Income Guarantee Ever Been Tested?

107

16

What about the Work Ethic?

113

17

What Will Life Be Like under a Basic Income Guarantee?

117

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viii

CONTENTS

18

Will a Basic Income Guarantee Threaten Democracy?

121

19

How Is a Basic Income Guarantee Administered?

127

20

What’s Happening with BIG around the World?

133

21

Can America Be Convinced?

141

22

Realistically, What Are the Chances for a BIG in the United States?

147

Appendix A

The Cost of a Basic Income Guarantee

153

Appendix B

Current Social Welfare Programs

161

Appendix C

A Brief History of a Basic Income Guarantee

171

Appendix D

Alternate Forms of a Basic Income Guarantee

179

Appendix E

Resources

181

Appendix F

Suggested Reading

183

Notes

185

Index

193

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Ta bl es

2.1 How Does BIG Work?

5

6.1 Earnings, Wages, Tax Rates

35

6.2 Federal Revenue vs. Income Tax Rates

41

7.1 7.2

Percent of GDP Spent on Social Programs by Advanced Nations

50

Tax Revenues as a percent of GDP by Advanced Nations

51

13.1 Annual Cost of BIG

87

13.2 BIG Savings

88

13.3 How Does BIG Work?

90

13.4 U.S. Government Revenues and Expenses—Current and Projected under a BIG Plan

91

Appendix Table 1

List of Tax Expenditures

153

Appendix Table 2

List of Welfare Programs

157

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Pr eface

What This Book Is Everyone should understand the great issues of our time. But, of course, nobody does. It’s not that we don’t have the time or the interest. It’s that the issues are too confusing. Too complex. We get it piecemeal—in the paper, on TV, over the Internet. We can never make much sense out of it. Congress and the President aren’t much different. Except that they have to make the decisions. Often on sketchy, incomplete facts. Or on overwhelming, contradictory data that no one person can possibly grasp. Wouldn’t it be nice to get the whole picture of an issue in one compact form? Something we could spend an hour or two on, and really understand? Well, this book does just that. It’s about one of those big issues—the Basic Income Guarantee. Sometimes it’s called the Negative Income Tax or the Guaranteed Income. It’s a plan that says that everyone has the right to live; that you and your family have the right to economic security. The plan would provide every American with a minimum level of income—enough for food, shelter, and basic necessities. This book is written in plain, simple English in easy to follow question-and-answer form. The book takes an affirmative position on the topic. But it raises all the objections of the other side. It asks the toughest questions. And answers them. If the answers make sense to you, you’ll probably support the idea. If the questions make more sense, you won’t. Simple. If both the questions and answers bore you to death, then maybe there’s no way to understand complex issues.

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xii

PREFACE

There are 146 questions and answers in the book. In 22 chapters. The book sort of flows from one question to the next. But one section may interest you more than others. Dip into it someplace. If you don’t at least get a spark of excitement over what this plan could do for you and for our country, then throw the book away. It’s not for you. If the book becomes popular, it may surprise a lot of people who think Americans aren’t ready to read anything more serious than the sports pages. Then there’ll be other books, by other people, on other issues.

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Ack now l ed gmen t s

No one has a monopoly on ideas, and this book is an attempt to bring together, in one compact form, ideas conceived and expressed by many others over a long period of time on the subject of a Basic Income Guarantee. I would like to acknowledge the writings of Robert Theobald, Philip Wogaman, Erich Fromm, Daniel Moynihan, Milton Friedman, Theresa Funiciello, Michael Murray, Steven Shafarman, Karl Widerquist, Philippe Van Parijs, Guy Standing, and Leonard Greene. I also must thank the following members of the USBIG Committee for their constant encouragement and dedication to BIG: Michael Lewis, Michael Howard, Almaz Zelleke, Eri Noguchi, Dan O’Sullivan, Stanley Aronowitz, Steve Shafarman, and Karl Widerquist. In addition, I acknowledge the founders and leaders of the worldwide BIG movement for more than 15 years: Guy Standing, Philippe Van Parijs, Eduardo Suplicy, Sean Healy, and Ingrid Van Niekirk, among many others. I also wish to thank Theresa Funiciello and Andrea Spica for their personal encouragement and support. Thanks also to Steven Strick and Andrea Spica for helping with the technical aspects of producing the manuscript, and to Rachel Nishan for compiling a very detailed index. Needless to say, this book would not have happened without Palgrave Macmillan asking me to update and rewrite my original 1983 book. Thanks are owed to my editorial assistant, Leila Campoli, to the Palgrave Macmillan production team for designing the cover, and to the anonymous reviewer who made dozens of positive suggestions.

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Prol o gue

Today, we take for granted rights that took decades of hard fighting to obtain: the right to free speech; the right to religious freedom; the right to vote; the right to free public education. Most advanced nations even provide the right to free health care. But what about the right to economic security? To a basic income guarantee? Is it a pipe dream? Is it politically possible? Is it right? The idea is not new. It’s as old as history itself. The Bible, the French Constitution, the United Nations, and dozens of commissions, scholars, and economists support the concept of a basic income guarantee. Basic Income Guarantee: Your Right to Economic Security argues that there is a moral obligation to provide every man, woman, and child with a decent level of living. Your right to be—your right to simple existence—is not something for others to grant or withhold as an economic carrot, or to give as a gift. It is a universal right. Some call it “Social Security for everyone.” In plain, simple English, Sheahen answers the toughest questions about an issue that would revolutionize the American way of life. Is the threat of starvation needed to make people work? Or does everyone have a moral right to eat, whether they work or not? The American Dream is not: “I’ve got mine; you get yours.” We’re all in this together. We can end poverty, close the wealth gap, and provide economic security to everyone by giving all citizens a modest, yet unconditional, income.

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CH A P T ER

1

Introduction: It’s Time to Think BIG

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 finds useful. —Bertrand Russell,1

The idea of a Basic Income Guarantee (BIG) has been called both a new hope for America and a threat to democracy; a creative new social program and the most stupid idea of all time; inspired legislation and a giant boondoggle; economic security for everyone and a free handout to welfare chiselers; the road to individual freedom and the path to social ruin. In 1969, the President’s Commission on Income Maintenance Programs recommended that America adopt a guaranteed annual income—with no mandatory work requirements—for all citizens in need. The report was buried and forgotten. Then, in his 1972 presidential campaign, Senator George McGovern proposed giving $1,000 to every needy American. His plan was a political disaster. It was a major reason for his defeat. During the 1970s, Congress wrestled with four different Guaranteed Income bills. Not one of them passed. Throughout that decade, the subject was debated loud and long at the highest levels in Washington. Volumes of testimony were heard from government officials, budget analysts, economists, and planners. All of the complex issues were thoroughly hashed and rehashed. Scores of meetings and reports kept a lot of top people—in and out of government—busy for a long time.

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But, in the end, virtually nothing was done. As we entered the 1980s, President Reagan cut social programs and proposed shifting welfare from Washington to the states. Unemployment rose. Poverty increased. The Social Security system was threatened. Many people slipped through the government’s “safety net.” Soup kitchens and homeless shelters reappeared. Today, welfare is still a dirty word, a “giveaway to shiftless freeloaders.” You hear it all the time. A lot of people just don’t want to work. They’d rather live off welfare. They’re lazy. One presidential candidate said: “If you’re unemployed and poor and not rich, it’s your fault.” People are just plain tired of government spending. Taxpayers want a balanced budget. The economy is in trouble. The nation is fed up with the recession and afraid of inflation and depression. Voters are in no mood to guarantee anyone’s income. The Basic Income Guarantee is one of the most misunderstood ideas of our time. Why would people work if their incomes were guaranteed? How can the United States afford it? Why should you and I work to support welfare chiselers? Why can’t everyone get a job? Would a basic income free people from the threat of starvation? Would it free people from any economic threat? Or would it destroy the work ethic? Would it even destroy society itself? Is it politically possible? These and other questions demand answers. During the debates in the 1970s, there were too few answers, too many doubts, and too much confusion. “After all the debate,” said U.S. Senator Daniel Moynihan of New York, “it was not likely that as many as a dozen United States senators understood the subject.” As a result, top government and program experts, as hard as they tried, couldn’t pass a basic income bill. It has now become clear that a greater understanding of the subject is needed. The time has come for the issues to be laid out in simple, everyday language so that everyone can understand. That’s what this book does. It answers, in simple terms, the toughest questions that have been raised about an issue that could revolutionize the American way of life.

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CH A P T ER

2

So What’s the BIG Idea?

What could you do with an extra $800 to $1,000 each month? And suppose your spouse receives the same amount, tax-free, for life. How might that benefit you and your family? What would it mean for the quality of your life now? And for your plans and hopes for the future? —Steven Shafarman, Peaceful, Positive Resolution (Denver, CO: Tendril Press, 2008)

1. What Is a Basic Income Guarantee? It’s a plan based on the principle that everyone has the right to live. A Basic Income Guarantee (BIG) is a government program to ensure every citizen’s basic economic security. All adult Americans would receive, without means-test or work requirement, an income sufficient for food, shelter, and basic necessities. Some call it “Social Security for All.” The grant is paid, and its level fixed, irrespective of whether the person is rich or poor, lives alone or with others, and is willing to work or not. In most BIG proposals it is granted not only to citizens but also to all permanent residents. A smaller income grant less than the subsistence level is a “partial” BIG. In fact, the easiest and safest way forward is likely to consist of enacting a BIG first at a level below subsistence, and then increasing it over time. The two main versions of BIG are basic income guarantee (BIG) and the negative income tax (NIT). BIG provides an income to all people, regardless of whether they have other income or not. The NIT provides that income only to those who lack sufficient other income.

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Both versions are structured so that a person who makes more money privately is financially better off than someone who makes less. Reading about BIG can be confusing because these terms are used in different ways by different people, and people use many different terms to mean the same thing. The basic idea of any of these policies is to make sure everyone has a little cash without being saddled with conditions or supervision. Any policy that achieves part of that goal moves in the direction of BIG.

2. What Should the Minimum Be? Just above the poverty level. High enough to survive on. Low enough so there’s incentive to work to earn more. For example, $10,000 a year for a single adult.

3. Would It Replace Welfare? Yes, if the tax credit is big enough so that welfare is no longer needed.

4. Would It Replace Social Security? Yes, but no one currently receiving Social Security would receive less.

5. Would It Replace Unemployment Compensation? Yes.

6. So What’s the BIG Deal? Each adult who files an income tax return receives an annual “BIG” or “refundable tax credit” of $10,000—the approximate 2010 poverty level for one person. The “refundable tax credit” is available to every adult, rich or poor, similar to Social Security, which enjoys wide support. (In contrast, the NIT plans of the 1970s would have gone only to those in need, similar to welfare, which does not enjoy wide support.) Here’s how it might work for a single person. For illustrative purposes only, the chart below (table 2.1) uses a flat tax rate of 35 percent. For a more progressive, detailed chart, please see chapter 13.

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SO WHAT’S THE BIG IDEA?

Table 2.1

5

How Does BIG Work?

Income

35% Tax

BIG Credit

Net Tax

0 10,000 20,000 30,000 40,000 50,000 100,000 500,000 1,000,000

0 3,500 7,000 10,500 14,000 17,500 35,000 175,000 350,000

10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

⫺10,000 ⫺6,500 ⫺3,000 500 4,000 7,500 25,000 165,000 340,000

Net Income Overall Tax Rate 10,000 16,500 23,000 29,500 36,000 42,500 75,000 335,000 660,000

0 0 0 1.7 10.0 15.0 25.0 33.0 34.0

Source : Table created by author.

7. Who Would Pay for a BIG? The U.S. federal government, out of the taxes it collects.

8. Can the United States Afford a BIG? Yes it can, if other tax deductions and social programs are trimmed— such as housing subsidies, welfare programs, farm subsidies, price supports, employment programs, and tax loopholes—many of which require massive bureaucratic costs. The cost of a $10,000 BIG and all other government expenses could be financed by either a 35 percent across-the-board income tax, or by a fair revision of the income tax code (see chapter 13 for details).

9. Is BIG a New Idea? No, the idea is as old as history itself. The Old Testament teaches about each person’s responsibility for his brothers and sisters. Statements by Amos, Micah, Jeremiah, and Isaiah illustrate the Old Testament view. In the third century BC, Aristotle and Plato said: “Poverty is the mother of revolution and crime.” Some shrug and say “the poor shall always be with us,” and move on. Others, like the Good Samaritan in the Bible, helped the homeless man after others had passed him by. In 1795, Thomas Paine, in Agrarian Justice, wrote: “We should create in every nation a national fund to pay to every person, when arrived at the age of 21 years, the sum of 15 pounds sterling, to

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BASIC INCOME GUARANTEE

enable him or her to begin the world. And also, 10 pounds sterling per annum during life to every person over the age of 50 years, to enable them to live in old age without wretchedness, and go decently out of the world.” One century later, in 1883, Otto von Bismarck implemented social insurance programs for Germany. In Western civilizations, churches have always been a traditional source of help. But their help was never enough. Charles Dickens wrote about the grinding poverty and the workhouses of nineteenthcentury England. But in most Western capitalist nations, there was never much government aid until the 1930s. In 1934, Louisiana Governor Huey Long proposed capping personal fortunes at $50 million each (roughly $600 million in today’s dollars) and giving every family an annual income of $2,000 (or one-third the national average). President Franklin D. Roosevelt (FDR) established job programs like the Civilian Conservation Corps (CCC) and Works Progress Administration (WPA). In 1935, Congress passed Social Security for the elderly and disabled. Most European nations established national health care and social programs to try to limit poverty and homelessness. But, despite the reforms of FDR, 39 million people—20 percent of the population— still lived below the poverty level in the United States in 1960.1 (For mote details on the history of the BIG movement, please see Appendix C). “Economic life cannot be left to a free competition of forces because competition, while justified and certainly useful if kept within certain limits, clearly cannot direct economic life . . . as this evil individualist spirit has more than sufficiently demonstrated.” (Pope Leo XIII, Revum Novarum (The Condition of Labor), 1891) “I am indifferent to the character of the workman. It is the duty of society to change the conditions in which he works. Should a workman lose his job through drunkenness, the state should nonetheless pay him his insurance. I do not like mixing up moralities and mathematics.” (Winston Churchill, proposing the first unemployment insurance plan in Great Britain, 1911)

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CH A P T ER

3

Why Did We Lose the War on Poverty?

America’s population is wealthier than any in history. Every year, the American government redistributes more than a trillion dollars of that wealth to provide for retirement, health care, and the alleviation of poverty. We still have millions of people without comfortable retirements, without adequate health care, and living in poverty. Only a government can spend so much money so ineffectually. The solution is to give the money to the people. —Charles Murray, In Our Hands (Washington, DC: The AEI Press, 2006)

10. What Was the War on Poverty? Under the names of Guaranteed Income and the Negative Income Tax, the idea of a Basic Income Guarantee (BIG) seemed to appear out of nowhere and onto the mainstream policy agenda in the mid1960s. The idea had been discussed in academic circles as far back as the 1940s, but suddenly academics, policy makers, and welfare activists all seemed to be hitting on the same idea that we should replace many of the different policies designed to target specific groups with one simplified, comprehensive policy to ensure that everyone had a little money. At the time in 1964 when President Lyndon Johnson declared a War on Poverty, people were looking for ideas. Market-oriented economists such as Milton Friedman and Freidrich A. Hayek endorsed the NIT approach. Progressive economists such as John Kenneth Galbraith, James Tobin, and Herbert Simon endorsed versions of the guaranteed income. Books were written on the topic

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by sociologist Erich Fromm, economist Robert Theobald, and theologian Philip Wogaman. In 1967, Martin Luther King Jr. endorsed the idea and wrote, “I am now convinced that the simplest solution to poverty is to abolish it directly by a new widely discussed measure: the guaranteed income. A host of psychological changes inevitably will result from widespread economic security.” In 1969, a Presidential Commission recommended, 22:0, that the United States adopt a guaranteed income, with no work requirements, for every needy American. The National Council of Churches, by a vote of 107:1, agreed. So did the Kerner Commission, the California Democratic Council, the Republican Ripon Society, and the 1972 Democratic Party platform. Johnson did not embrace the BIG model. More generous versions of the traditional, welfare-state model—which included conditional programs targeted at specific groups—were adopted. By 1969, government benefits increased and the number of people living in poverty in America dropped—from 39 million in 1960 to 25 million—about 12.5 percent of the population.

11. What Was FAP? In 1969, President Richard Nixon proposed his Family Assistance Plan (FAP), calling it “the most significant piece of social legislation in our nation’s history.” It was structured like an NIT, but it was watered down with eligibility limits and work requirements in the hope of increasing its political appeal. For a family of four, with no outside income, the basic federal payment would have been $1,600 a year. States could add to that amount. A worker could keep the first $60 a month of outside earnings with no reduction in his benefits. Beyond that, his benefits would be reduced by 50 cents for each dollar earned. Under FAP, anyone who accepted benefits was required to accept work or training, provided suitable jobs were available either locally or at some distance if transportation was provided. The only exceptions would be those unable to work and mothers of preschool children. FAP received wide support. Editorials were 95 percent favorable: “A new and promising approach” (Business Week); “A bold new blueprint” (Los Angeles Times); and “A Giant Leap Forward” (Chicago Sun Times). The bill found supporters on both the Left and the Right, but it also found opposition. Southern and conservative senators generally

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WHY DID WE LOSE THE WAR ON POVERTY?

9

opposed the bill because they felt the minimum amount ($133 a month for a family of four) was too high. They also opposed the principle of a guaranteed income. “Cost is not the problem,” Senator Russell Long of Louisiana said, “The objection is paying people not to work.” Some liberal senators opposed FAP because they felt it was inadequate and repressive. They called it “Guaranteed Annual Poverty.” The National Association of Social Workers and the National Welfare Rights Organization felt the benefit level was inadequate and the work requirements oppressive. FAP passed the House of Representatives, 243-155, on April 15, 1970. On November 20, 1970, after many amendments, FAP was defeated, 10-6, in the Senate Finance Committee. Senator Daniel Moynihan, a New York Democrat, said, “After a year and a half of debate, it was not likely that as many as a dozen U.S. Senators understood the bill. In politics, a certain patience is demanded. The idea of a guaranteed income came precipitously to public affairs. Few were prepared. Time should remedy this.” Indeed, FAP proved to be the high-water mark of the guaranteed income movement in the United States. In 1972, FAP was modified and again debated in Congress. It again easily passed the House of Representatives but was defeated, though by only 10 votes, in the Senate. A few years later, President Jimmy Carter proposed a Program for Better Jobs and Income. The plan would have abolished several conditional welfare programs and replaced them with a single national cash payment—about $3,800 a year for a family of four. Although the bill retained some of the elements of the NIT, its more restrictive qualifications made it less of an income guarantee. Liberals generally felt that the benefits were inadequate. Conservatives were horrified at the $20 billion in extra costs. The plan died without being debated by either House of Congress. In 1979, a scaled down welfare reform plan, which gave no pretense of being a guaranteed income, passed the House of Representatives, 222-184, but it died without coming to a vote in the Senate.

12. Why Haven’t I Ever Heard of BIG? In the early 1980s, the mood in Washington changed. Politicians turned to scaling back the welfare system rather than improving and expanding it. Substantial reform along the BIG model has not been discussed at the federal level since then.

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BASIC INCOME GUARANTEE

Around 1982, homeless people reappeared on U.S. streets for the first time since the Depression. Soup kitchens sprang up. This trend culminated in the 1996 welfare reform bill that replaced the 60-yearold federal program called Aid to Families with Dependent Children (AFDC). The new law created a program called Temporary Assistance to Needy Families (TANF). Under TANF, the federal government gave a block grant to each state. Instead of moving toward the BIG model, TANF moved away from it. It added work conditions to a program that had already been conditional on parenthood. It removed what had been a permanent guarantee of assistance for qualifying families and replaced it with a limited time of eligibility for any recipient. The new law was sold as a way to get people off welfare. And it did. Welfare rolls in the United States went down more than 60 percent after 1996. The program that once helped more than 14 million people served an average of four million in 2010. But it didn’t reduce poverty. That’s because welfare reform dumped many recipients into low-paying jobs—with no benefits and no ability to move up. Government figures showed that 46.2 million Americans still lived below the poverty level in 2010—15.1 percent of the population. Some politicians claim the 1996 welfare reform bill is a success because it cut the welfare rolls in half. By that measurement, why don’t we just kick everyone off welfare and drop the welfare rolls to zero, just like in Charles Dickens’ nineteenth-century England? After all, Tiny Tim really didn’t have it so bad. The goal of welfare reform should be to reduce poverty, not just to reduce caseloads. The social problems that brought BIG to consideration in 1969 persist today.

13. Did Any Good Come from These Debates? Yes. Although the guaranteed income movement fell short of establishing a national BIG in the 1970s, some good things came out of this struggle. • In 1974, Congress passed Supplemental Security Income (SSI)— essentially an NIT—for people over 65. • Food stamps were gradually created and expanded beginning in 1964 and became a fully national program in 1974. • In 1976, Congress passed The Earned Income Tax Credit (EITC), which gives money in the form of a “refundable tax

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credit” to low-income workers. The EITC is not a BIG, because one has to earn income privately to receive it, but it is a negative income tax in the sense that government pays about 30 million low-income workers instead of asking them to pay to the government. “A decent provision for the poor is the true test of civilization.” (Samuel Johnson)

14. In the Past 48 Years, We Have Spent Billions of Dollars on Welfare Programs. Yet We Have Failed to Reduce Poverty. Why? Fast-forward 48 years from 1964 and we find that welfare has failed because it has destroyed people’s ability to take control of their own lives and make their own decisions. We assume the poor are incapable of making sound decisions; that they can’t be trusted with cash and have to be protected from themselves. It’s as if your employer thought you so irresponsible that he sent part of your paycheck to your landlord, another part to your grocer, another to the dealer that provided your car loan, and another to your doctor. There are more than 300 income-tested social welfare programs costing more than $450 billion a year. Much of that goes for administrative expenses and not to the needy. America hasn’t seen full employment in decades. Even a full-time job at minimum wage can’t lift a family of three from poverty. And millions of Americas—children, the aged, the disabled—are unable to work. “I believe the right to eat is as important as the right to work.” (Justice William O. Douglas)

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CH A P T ER

4

Did You Know?

46.2 million Americans still live below the poverty level— 15.1 percent of the population, the highest since 1993. —U.S. Census Bureau Annual Poverty Report, September 2011

15. Did You Know? • The 2010 U.S. poverty level was $11,139 (one person), $14,218 (two people), $17,568 (three people), $22,314 (four people), and $26,023 (five people).1 • There are 46.2 million Americans who still live below the poverty level—15 million more than 30 years ago and up from 43.6 million a year earlier. • About 15.1 percent of the population—nearly one out of every six Americans—lives in poverty, up from 14.3 percent in 2009— the highest since 1993. • Twenty-two percent of children live in poverty, up from 20.7 percent in 2009. That’s one in every five, compared to one in 12 in France and one in 38 in Sweden. Among black children, 39 percent live in poverty. Poverty in early childhood has been found to hinder later school achievement. • Among blacks and Hispanics, 27.4 and 26.6 percents, respectively, live in poverty. • There are 9.9 percent whites and 12.1 percent Asians living in poverty. • More than 17 million women live in poverty. The poverty rate among women rose to 14.5 percent from 13.0 percent in 2009, the highest rate in 17 years. • The poverty rate among single mothers climbed to 40.7 percent in 2010; more than half of all poor children lived with single mothers.

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• Among Americans aged above 65, there are 3.2 million living in poverty. That’s one in every 11. • For people aged 18 to 64, the poverty rate reached 13.7 percent, the highest level since at least 1966. • There are 20.5 million Americans—6.7 percent of the population—living below half the poverty line ($11,157 for a family of four and $5569 for a single person). • Among the American children, 9.9 percent live below half the poverty line. • There are 49.9 million Americans without health insurance. • Between 672,000 and 820,000 Americans are homeless at any one time.2 • Median household income in 2010 dropped 2.3 percent, to $49,445. That is 7.1 percent below the 1999 peak of $53,252. For blacks, the one-year drop was 3.2 percent, to $32,068. • The poverty rate for people in families with one full-time yearround worker was 9.5 percent in 2010. • There are 48 percent of Americans who are in the low-income category (defined as at, or below, 200 percent of the poverty level—$44,750 for a family of four). • The poverty rate for single mothers and their children rose from 32.5 percent in 2009 to 34.2 percent in 2010. • Hunger and food insecurity cost the United States at least $167.5 billion per year. This is due to the combination of lost economic productivity, expensive public education because of rising costs of education for the poor, avoidable health care costs, and the cost of charity to keep families fed.3 • Soup kitchens and homeless shelters—unknown in Northern Europe—are taken for granted here. Our mailboxes are daily stuffed with appeals for the needy. Food banks and homeless shelters continue to serve more and more people. Yet, homelessness seems to be an all-encompassing term for many of us to apply to a segment of society that most people never see, have no use for, and consider hopeless. • The problem is that even all the private charities in America put together can’t end hunger and poverty. The total of all private giving to combat poverty was equal only to 11 percent of government contributions.4 • Ending poverty demands government programs, such as Social Security, unemployment compensation, Medicare, welfare, food stamps, Head Start, child care, and more.

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DID YOU KNOW?

• Some think the poverty level is set too low; that a realistic bare subsistence level is 125 percent of the poverty level—about $27,892 a year for a family of four. There are 60.2 million Americans—19.5 percent of the population—who have incomes below that level. “Poverty in America today is a death sentence for tens of thousands of our people. Some 45,000 people die each year because of lack of access to adequate health care. The United States has the highest rate of childhood poverty in the industrialized world. This is both an outrage and a tragedy.” (U.S. Senator Bernie Sanders of Vermont, “Is Poverty a Death Sentence,” The Bernie Buzz Newsletter, September 13, 2011)

16. But Don’t the Official Poverty Figures Exclude Some Income? Yes. Some people claim the poverty picture isn’t so bleak. They claim that if you include “in-kind” income, then only about 34 million people fall below the poverty threshold. It gets confusing. Simply put, if the government didn’t provide any aid to anybody, 73.1 million Americans would have annual income below the official poverty level. But the government provides, to millions, • cash payments, • food stamps and refundable tax credits, • in-kind payments, • cash payments (called “transfers”) that include • Social Security, • railroad retirement benefits, • government pensions, • unemployment insurance, • Workmen’s Compensation, • veterans’ pensions, • veterans’ compensation, • Supplemental Security Income, and • Temporary Assistance to Needy Families. Social Security payments kept 20.3 million people out of poverty in 2010, including 13.8 million seniors and 1.1 million children.

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Unemployment benefits lifted 3.2 million people above the poverty line and SSI benefits kept 2.1 million people out of poverty in 2010. TANF (1.0 million), Veterans Pensions (0.2 million), and Workmen’s Comp (0.1 million) benefits raised another 1.3 million people out of poverty in 2010. After these cash payments are made by the government, the incomes of 46.2 million people are still below the poverty level. That’s what the official poverty figure is—46.2 million. The government also provides payments and refundable tax credits—not included in figuring a family’s total income—in the form of • Food Stamps (“SNAP” Program), • Earned Income Tax Credit (EITC), and • “Additional Child Tax Credit” (CTC). • Food stamps allowed an additional 3.9 million people, including 1.7 million children, to escape poverty in 2010. • EITC benefits kept 5.4 million people above the poverty line in 2010. • CTC benefits lifted 2.3 million people, including 1.3 million children, from poverty. After these payments are made by the government, the incomes of 34.6 million people are still below the poverty level, which is sometimes called an “alternative poverty line.” In addition, the government provides “in-kind” payments to millions in the form of • Medicare, • Medicaid, • child nutrition, • housing assistance, and • job training. So there’s some disagreement as to whether 46 million, 34 million, or some lesser number are considered as “poor.” It’s hard to consider medical care as true “income.” You don’t get it unless you’re sick. If you count it as income, the sicker you are, the more income you’ll have. In November 2011, the Census Bureau issued a supplemental poverty report showing that 49.1 million—15.9 percent of the population—lived in poverty. The report cited high housing costs— particularly in the West—as affecting the cost of basic necessities.

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DID YOU KNOW?

17. But Don’t Some People Say That Poverty Isn’t That Bad? Yes. A few private economists say only 10 million—3 percent of the population—are poor. They claim a lot of income goes unreported. Robert Rector of the Heritage Foundation claims 80 percent of poor households have air-conditioning, 75 percent have a car or a truck, nearly 66 percent have cable or satellite TV, most have a refrigerator, a microwave, and a coffee maker, and the average poor American has more living space than the average German or Swede— and, therefore, the United States should spend less on aid such as food stamps. In other words, “Isn’t poverty swell?” But most of today’s homes were constructed with air-conditioning. Many poor families don’t use it because they can’t afford the electricity. And if a family has a refrigerator, is there any food to put in it? Over the past 50 years, TVs have gotten a lot cheaper, but college, child care, and health care have gotten a lot more expensive. A used refrigerator costs $150; a used microwave, $45; and a used AC, $30. And a cell phone can be a virtual necessity if one is trying to find a job or keep one. The Heritage report claims that 96 percent of poor parents said their children weren’t hungry at any time because they couldn’t afford food. Yet, the U.S. Department of Agriculture found in 2008 that 50.3 percent of poor households with children said there were days when they didn’t know how, or if, they could pay for their next meal. The Heritage report seems to sidestep the fact that thousands of Americans are homeless and sleeping on the streets, and that homeless shelters and soup kitchens turn people away every day. Multifamily households are becoming more and more common as people struggle to get by. “A refrigerator does not a middle-class family make.” (Melissa Boteach, Half-in-Ten Manager at the Center for American Progress Action Fund, “What You Need When You’re Poor: Heritage Foundation Hasn’t a Clue,” CAP Newsletter, August 5, 2011.)

18. Do Some People in Poverty Still Pay Income Tax? Yes. The 2010 poverty level was $11,139 for a single person. Yet, single persons who earned that amount had to pay $179 in federal

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income tax, thus dropping them below the poverty level they had struggled to climb above. Some states even required poor families to pay income tax bills of several hundred dollars in 2010. A two-parent family of four with annual income at the poverty line—$22,314 for a family of that size— owed $498 in Alabama, $292 in Hawaii, $238 in Georgia, and $234 in Oregon. Other states levying tax of more than $150 on families with poverty-level incomes were Illinois, Iowa, Montana, and Ohio.5 There is something wrong with a system that claims it wants to lift people from poverty and then, when successful, taxes them back into it. “The condition of poor people in America is a matter of national security, just like Iraq and Afghanistan.” (Cornel West, professor, Princeton University, October 15, 2011)

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CH A P T ER

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Why Are Jobs Not the Answer?

The century of laboring man has come to an end, and yet governments continue to link social entitlements to the performance of labor. The era of market regulation has ended. Basic income security is a right of all. —Guy Standing, director of the Socio-Economic Program of the International Labor Organization, advisor to the government of South Africa in 1995–96, and author of The Precariat: The New Dangerous Class (Bloomsbury, 2011)

19. Why Do We Need a Change from Where We’re at Now? We have entered a new era. Machines are doing work people used to do. More than 14 million Americans are unemployed. More than 46 million Americans live in poverty. Most people are afraid of losing their job. Millions can’t find a job. Millions aren’t able to work. The current welfare system doesn’t work. It’s a cumbersome mishmash. Social Security payments are often too low, unemployment insurance benefits can run out too soon, and Food stamps aren’t enough. Private charities help, but the problems are too big.

20. But Isn’t the Number of Poor Declining Each Year? No. The number of people living in poverty in the United States dropped from 39 million in 1960 to 25 million in 1969, stayed at that

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level during the 1970s, and then rose to 46.2 million in 2010—15.1 percent of our population. In 1964, the War on Poverty was declared. Today, that war is still bogged down in the trenches, little closer to victory than when it began. Despite all the innovative programs, despite the hundreds of billions of dollars spent, the number of people classified as poor is at its highest in more than 30 years.

21. Why Isn’t the Number of Poor Declining? There are five reasons for this: • Old age. More people are reaching retirement age than ever before. Once out of the job market, their incomes often slip below the poverty line. • The poverty cycle itself. Once inside this cycle, it’s hard to get out. Poverty means poorly fed pregnant women. That means poorly fed fetuses in their wombs. That means fetuses that fail to synthesize proteins and brain cells at normal rates. That means a high rate of mortality of these infants. It means appallingly high rates of prematurity and mental retardation in the survivors. It means further lack of brain growth because of poor feeding in the crucial years of early childhood. Ultimately, it means that millions of Americans today have permanently stunted brains. • Automation. Unskilled and semiskilled workers simply can’t get jobs anymore. The nation’s unemployment rate varied between 3 percent and 4 percent in the 1960s. Now it’s 8 percent to 10 percent. The government used to define “full employment” as just that: everyone works. Then it said 3 percent unemployed is full employment. Now the goal is 7 percent and heading up. Each recession is a little worse. We’ve always relied on the job market to provide jobs and income for the American people. But it doesn’t work anymore. That’s why a new system is needed. • Jobs moving overseas. Hundreds of U.S. companies have laid off U.S. workers to look for cheaper labor overseas. • The growth in the number of overseas workers. The addition of 2.3 billion Chinese and Indians to the global labor force is reducing the jobs and wages of unskilled blue-collar and offshorable white-collar workers in advanced economies.1 “There was a time when I made phone calls looking for work and went out on interviews. I expected to be hired. Now I don’t

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look so hard, because after I get turned down a couple of places, it kind of messes with me. It discourages me and I don’t want to any more. I guess I don’t want too many letdowns in one day.” (21-year-old black Navy veteran)

22. Why Can’t We All Pull Ourselves Up by Our Own Bootstraps? It’s too hard. Poverty is a vicious circle. You get knocked down a few times. Each time it’s tougher to get up. One day you don’t. You say to hell with it. Down deep, we know how tough it is. Every time someone from “the ghetto” rises up to be somebody, we’re so shocked we make a big deal out of it. We make an example of him and say: “See, if he can do it, so can you.” It takes money to break out of the poverty cycle. There’s no easy way out. In a rural area, where do you go to find work if none exists? You can go to the city, but only if you can raise the money to move. If, somehow, you manage to get to the city, you’re limited by the spread of the city itself. Often, you become trapped in one little area. Distances are too vast to walk. Public transportation, what there is of it, costs. If you somehow manage to find your way to a potential job, what are your chances of getting it? Are you well-groomed? Neatly dressed? That costs. Are you alert? Ready to work? Not if you haven’t had a decent bed to sleep in. Are you confident, positive, sure of yourself? Hardly. There are two problems with leaving poverty—the money to get out and, once out, getting a job, food, bed, and help. Today in America none of these are available to a lot of people who are really trying to fit in. “Give to everyone who asks of thee, and from him who takes away thy goods, ask no return.” (Luke, 6:30)

23. Well, If You’re Poor and Not Rich and You Don’t Have a Job, It’s Your Own Fault. That’s a direct quote from Republican presidential candidate Herman Cain, whose comment was followed by cheers from the audience in a Las Vegas debate on October 19, 2011. But is it your fault if you’re out of work when 24 million other Americans are also out of work?

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Is it your fault if you lose your home when so many millions of others are losing their homes? Is it your fault that you can’t afford to see a doctor when you’re sick when there are 50 million Americans in the same boat as you are? The average amount of time that a worker stays unemployed in the United States is over 40 weeks. Back in 1969, 95 percent of all men between the ages of 25 and 54 had jobs. In July 2011, only 81.2 percent of men in that age group had jobs. Men and women without income cannot afford to take risks even for a day; they cannot take advantage of opportunities for future improvement which require a current investment of time and money. The simple day-to-day effort to survive may require all of a person’s will. The disabled person or the elderly couple can do little to escape poverty. The woman with several children cannot manage a household while simultaneously looking for work or being trained. The unskilled, middle-aged, unemployed laborer is helpless in the face of unemployment. The problem will not solve itself in time. The poor will not be able to become un-poor without government aid. (President’s Commission on Income Maintenance Programs, 1969)

24. Isn’t Education the Best Way to Reverse the Poverty Cycle? No. American folklore says a child born in poverty can reasonably hope to rise by his or her ability, to become a doctor, lawyer, or industrial chief. It’s a myth. The higher your status at birth, the more education you’re likely to get. So those born to money tend to make money. Those born to poverty tend to stay there. The odds are long against certain children making it in America. And those odds haven’t changed much throughout American history. A project led by Markus Jantti, an economist at a Swedish university, found that 42 percent of American men raised in the bottom fifth of incomes stay there as adults. That compares to Denmark (25 percent) and Britain (30 percent). Meanwhile, just 8 percent of American men at the bottom rose to the top fifth. That compares with 14 percent of the Danes and 12 percent of the British.

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You’ve heard—and maybe you believe—that each individual is the master of his or her fate. Well, that’s not so. It’s a false belief and leads to the misconception that poverty is the individual’s own fault, when, in fact, it’s the fault of the structure of our society.

25. Why Can’t Everyone Get a Job? The aged, sick, and disabled can’t. Children and many mothers can’t. Even able-bodied men can’t. There aren’t enough jobs to go around. The unemployment rate currently ranges from 8 percent to 10 percent.2 There are 14 million Americans who want jobs but can’t find them. Others—an estimated ten million—have given up looking for work because they have become too discouraged. Counting them brings the unemployment rate to 16 percent. About 86.7 million working-age adults were unemployed for at least a week in 2010, compared with 83.3 million in 2009. An astounding 51 percent of youth are unemployed. The percentage of unemployed workers who had been out of work for at least half a year reached a record high of 43 percent in 2010. The percentage of U.S. adults with jobs is down to 58.1 percent, from 64.7 percent in 2000, according to the St. Louis Fed. Automation means we need fewer workers to produce the goods we need. People are working two and three jobs just to make ends meet.

26. The Myth of “Welfare to Work” There’s a myth that, with some new skills and some education, maybe low-wage workers can lift themselves up into the middle class. Or maybe their children could. Well, maybe, if they’re lucky. But the record of upward mobility in the United States is not anywhere as good as a lot of people would like to think. Most people stay roughly in the income category they were born into and that their parents occupied. An American University survey found that children from low-income families have only a 1 percent chance of reaching the top 5 percent of the income distribution ladder, versus children of the rich who have about a 22 percent chance. “Work” has been virtually everyone’s solution to poverty for thousands of years. But the United States has never had enough viable jobs for everyone able and willing to work.

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Most Americans are six months from poverty. Even a full-time job at the minimum wage can’t lift a family of three from poverty. And millions of Americans—children, the aged, the disabled—are unable to work. “Welfare to work” can never solve the poverty problem because there aren’t enough jobs for everyone who wants to work, and because many jobs don’t pay enough wages to live on. “We have become two Americas: one for the rich, who can get whatever they want whenever they want it, and one for the rest of us.” (Presidential candidate John Edwards, Speech in Des Moines, Iowa, November 15, 2007)

27. The Myth of “Jobs” Today, virtually every political candidate is saying: “I can create more jobs, so vote for me.” Nobody states the obvious truth, that the marketplace has changed and there will never again be enough jobs for everyone who wants one—no matter who is in the White House or in Congress. As was predicted a half century ago, electronics and computer technology have taken over much of the routine work that people used to do. Fewer people are needed to do the work to produce the necessary goods. Manufacturing jobs accounted for 22 percent of the U.S. total in 1970, but only 10 percent of all jobs today. It now takes only nine workers to produce what ten did a few years ago. Wal-Mart increased its revenues in 2002 by 12 percent with the same number of employees. No industry is untouched. Even the nation’s dairies are producing 25 percent more milk with 17 percent fewer cows than 20 years ago. And millions of jobs are moving overseas. Levi Strauss closed its last U.S. sewing plant. The company shifted its production to China and other countries with cheaper production costs. A Michigan refrigerator company moved 157 jobs to Mexico, despite offers of tax breaks and incentives from the city and state. In a global economy, jobs will continue to move to where they can be performed at the highest quality for the lowest cost. And it’s not just clothing and electronics being made by workers in India, China, and similar places. Now, office and professional jobs are being shipped out. IBM is moving 4,700 white-collar, engineering, and managerial jobs overseas. In the next 15 years, American employers will move about 3.3 million white-collar jobs and $136 billion in

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wages abroad, according to Forrester Research. And we even have robots doing human work. The conditions that created jobs in the twentieth century—mass production and the large organization—are disappearing. Technology enables us to automate the production line. The United States has gone from well-paying manufacturing jobs to low-paying service jobs. And it’s not just the United States where jobs are disappearing. Economists at Alliance Capital Management in New York found that since 1995 more than 22 million factory jobs have vanished worldwide. In fact, the United States has not even been the biggest loser. Between 1995 and 2002, we lost about 11 percent of our manufacturing jobs. But over the same period, the Japanese lost 16 percent of theirs. Job losses will only get worse as the twenty-first century progresses. Global capital will continue to move jobs to places on the planet that have the lowest labor costs. Technology will continue to improve, eliminating countless jobs.

28. Why Are Jobs Disappearing? In two words, higher productivity. All over the world, factories are becoming more efficient. They’ve installed new equipment and are using new technology. Computer technology has been advancing steadily for the past 40 years, doubling speed and memory every 18 months. Each year, the computers are doing more and more of the work. And that means fewer jobs—everywhere. Erik Brynjolfsson and Andrew McAfee, economists at MIT, published an influential book titled Race Against the Machine, looking at how computers are increasingly able to perform tasks better than humans do, from driving (Google software recently took a self-driving Prius on a 1000-mile trip), to sophisticated pattern recognition, writing creative essays, and composing award-winning music. The result, they say, is that technology may soon be a net job destroyer. The IBM-designed computer “Watson” defeated two former champions in a three-night Jeopardy game. There’s no evidence to back up the claim that we can create jobs for everyone who wants one. To rely on jobs and economic growth does not work. We have to get rid of the myth that “welfare to work” will solve the problems of unemployment, poverty, and homelessness.

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“Work” and jobs are not the answer to ending poverty. This has been the hardest concept for us to understand. It’s the hardest concept to sell to citizens and policy makers. To end poverty and to achieve true economic freedom, we need to break the link between work and income. Job creation is a completely wrong approach because the world doesn’t need everyone to have a job in order to produce what is needed for us to live a decent, comfortable life. We need to rethink the whole concept of having a job. When we say we need more jobs, what we really mean is we need more money to live on. The paradox of poverty in the midst of plenty causes many to ask why some people remain poor when so many of their fellow Americans have successfully joined the ranks of the affluent. It is often assumed that anyone who wishes to live well can achieve that objective by seeking and accepting work. It is often argued that the poor are to blame for their own circumstances and should be expected to lift themselves from poverty. The Commission has concluded that these assertions are incorrect. Our economic and social structure virtually guarantees poverty for millions of Americans. Unemployment and underemployment are basic facts of American life. The risks of poverty are common to millions more who depend on earnings for their income. We all grow old. We all can fall victim to unemployment caused by technological change or industrial relocation. Any of us could become sick or disabled. And becoming unpoor is extraordinarily difficult. What does a disabled man, an elderly couple, or a child do to escape poverty? How does an unskilled, middle-aged laborer adjust to the loss of a job? The simple fact is that most of the poor remain poor because access to income through work is currently beyond their reach. (President’s Commission on Income Maintenance Programs, 1969)

29. If There Aren’t Enough Jobs to Go Around, What Are We All Going to Do? Maybe there aren’t enough “jobs” in the usual sense, but there’s plenty to do. Nurses’ aids, care for the aged, child care, Red Cross helpers, travelers’ aids, environmental and public transit workers. It’s called “the human care of human beings.” All kinds of human services—badly needed—barely being done today.

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We need people to work in fields such as public health and safety, community services, conservation, and recreation. We need more drug treatment facilities and personnel. We need workers to build more public transit. We need more law enforcement manpower with new equipment and techniques. We need more occupational safety and health inspectors, waste treatment and recycling facilities, paramedics, prison counselors, and scientists. New, automated equipment means workers can produce more goods per hour. If we organize the economy to meet our real needs, this will mean increased productivity. It will mean a higher standard of living for everyone and shorter hours of work. The physical goods we need—cars, television sets, housing—are being produced by fewer and fewer people. This can mean a four-day 24-hour week instead of a five-day 40-hour week. Or it can mean retirement at age 45. Or a three-month vacation every year. The fundamental problem posed by automation is that it invalidates the general mechanism so far employed to undergird people’s rights as consumers. Up to this time, economic resources have been distributed on the basis of contributions to production, with machines and men competing for unemployment on somewhat equal terms. In the developing automated system, potentially unlimited output can be achieved by systems of machines, which will require little cooperation from human beings. As machines take over production, the men who are displaced become dependent on government— unemployment insurance, social security, welfare payments. So we have a historic paradox: a growing proportion of the population is subsisting on minimal incomes, often below the poverty line, at a time when sufficient productive potential is available to supply the needs of everyone in the United States. There is no question that automation would make possible the abolition of poverty at home and abroad. But the industrial system does not possess adequate mechanisms to permit these potentials to become realities. The industrial system was designed to produce an ever-increasing quantity of goods as efficiently as possible, and it was assumed that the distribution of the power to purchase these goods would occur almost automatically. The continuance of the income-through-jobs link as the only major mechanism for distributing effective demand—for granting the right to consume—now acts as the main brake on the almost unlimited capacity of an automated production system. As a first step to a new consensus, it is essential to recognize that the traditional link between jobs and incomes is being broken.

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The economy of abundance can sustain all citizens in comfort and economic security whether or not they engage in what is commonly reckoned as work. Wealth produced by machines rather than by men is still wealth. We urge, therefore, that society, through its appropriate legal and governmental institutions, make an unqualified commitment to provide every individual and every family with an adequate income as a matter of right. This undertaking we consider to be essential to the emerging economic, social, and political order in this country. (Ad Hoc Committee, The Triple Revolution, 1964; reprinted in Radical Perspectives on Social Problems , edited by Frank Lindenfeld (MacMillan & Co., 1968))

30. We Made It in the System. Why Can’t Everyone Else? This is known as amnesia. The people who ask this question have, themselves, all too often gotten help from others. Some of the very people today who criticize programs that provide work and training plans for others are the same people whose grandparents cut their eyeteeth on NYA, WPA, CCC, and FER A in the 1930s. The same people who want to cut welfare spending are often the ones who enjoy another type of welfare. Some of them call it defense contracts. If they’re in universities, they call it research grants. If they’re farmers, they call it farm subsidies. If they’re corporations, they call it loan guarantees. The only difference is that they get a lot more than welfare clients do. If AIG, General Motors, and Chrysler can’t make it on their own, can we expect some little kid who’s not too bright to make it on his own? “There is nobody in this country who got rich on his own. Nobody.” (Elizabeth Warren, candidate for the U.S. Senate in Massachusetts, Speech in Boston, Mass., October 14, 2011)

31. But I’m Not Poor. How Does Poverty Affect Me? First, it affects your humanity. If you can’t identify with a woman who has to fight off rats from her children, then you’ve lost that thing that makes you civilized.

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Second, it affects your safety. The cause of most crime is economic. Someone who can’t get enough to eat through legal means may try something illegal. The threat of poverty affects your security. Many families are one serious illness away from bankruptcy. Unemployment for long periods has driven others into the poorhouse. A Basic Income Guarantee would be like an insurance policy. It would provide economic security to everyone. “Poverty is the mother of crime.” (Plato) “Have you noticed an increase in crime due to the uncertainty of our economy? Call now for a complete home security system.” (Ad in Los Angeles Times, April 18, 2012)

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CH A P T ER

6

Why Is There So Much Inequality in the United States?

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. —Billionaire Warren Buffett, New York Times op-ed, August 14, 2011

32. Has America Lost Its Democracy? In September 2011, thousands of people gathered spontaneously in Zuccotti Park in New York City to protest growing income inequality and what some called “the loss of our democracy.” After years of rising unemployment, people’s homes being foreclosed, banks being bailed out, rising poverty, and increasing income inequality, people of all ages and backgrounds converged in New York City. Soon the protests had spread to 800 other cities in 82 countries on five continents. Fifty-one percent of Americans supported the protestors; 23 percent were unfavorable; 23 percent weren’t sure. Eighty-one percent of Americans felt the country was “on the wrong track.”1 “What do you want?” asked some observers. “What took you so long?” asked others. Two-thirds of likely voters say the American middle class is shrinking; 74 percent believe income inequality has become a problem for the country. As for the tax code, 58 percent of Republicans, 70 percent of Democrats, and 77 percent of independents find it either not very fair or not at all fair.2

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“Middle Class and Sinking Fast.” “Tax the Greedy, Feed the Needy.” “Reclaim America.” “Protect Schools, Not Millionaires.” “I Want to Work.” “Honk for the 99%.” (Signs seen at Occupy Wall Street, October 2011)

33. Why Does Inequality and Poverty Exist If the United States Is so Rich? Because the wealth of America is concentrated in the hands of a few. The income gap between rich and poor families in the United States has widened since World War II. America’s richest 400, says Forbes magazine, have a combined wealth that tops $1.37 trillion—an average of $342 million each. The top 400 have as much wealth as the bottom 150 million Americans.3 In 1980 the share of all pretax income collected by the top 1 percent of earners was 9.1 percent; by 2006 it was 21 percent. In 1980, the average income of the top 1 percent was about 30 times that of the lowest 20 percent of households. In 2006, it was more than 100 times that of the lowest quintile.4 While the top 1 percent of Americans—the target of the Occupy movements—earned 21 percent of the nation’s income, they owned a staggering 35 percent of the wealth in 2007, up from 18 percent in 1980. The wealthiest 1 percent own 38.2 percent of stock market assets.5 About 57 members of Congress are part of the 1 percent. Roughly 11 percent of Congress have net worth of more than $9 million, according to a USA Today analysis of 2010 financial disclosures, compiled by the Center for Responsive Politics. That’s enough to put them in the top 1 percent of wealth owners. Anyone who earns more than $516,633.00 is also considered part of the 1 percent. From 1983 to 2009, about 80 percent of the increase in income went to the top 5 percent, and the bottom 60 percent lost 7.5 percent in income.6 Taxpayers making $1 million and up totaled less than 0.2 percent of U.S. taxpayers, but they collected 9.5 percent of the nation’s income.7 The bottom 20 percent of the U.S. population—more than 40 million men, women, and children, including the unemployed, the aged, and the disabled—receive only 4.8 percent of all national income.8

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Twelve major corporations had a combined profit in the United States of $171 billion over the past three years, but their combined corporate income tax over those three years was negative— $2.5 billion. That’s an average corporate income tax of negative 1.5 percent over three years.9 Over the past three years, Boeing reported $9.7 billion in pretax U.S. profits. But instead of paying the 35 percent federal corporate tax rate on those profits, Boeing received $3.5 billion in tax subsidies. As a result, it paid no federal income tax at all over those three years. General Electric (GE) paid only 2.3 percent federal income tax rate over the past decade.10 18,000 households earning more than a half-million dollars in 2010 paid no income taxes at all.11 The top 1 percent has more financial assets than the bottom 95 percent.12 The share of income going to higher-income households—the top 20 percent—rose 275 percent between 1979 and 2007, while the share of income going to lower-income households—the bottom 20 percent—rose only 18 percent.13 The typical U.S. household headed by a person aged 65 or older has a net worth 47 times greater than a household headed by someone under 35.14 In the 1970s, corporate chief executive officers (CEOs) earned about 40 times as much as their lowest paid worker. Now they earn more than 400 times as much.15 “They say; ‘Ha-ha, look at that bearded guy in the sandals.’ You say, ‘Hmmm . . . A bearded guy in sandals protesting the money lenders. Where have we seen that before?’ ” (Occupy Wall Street, October, 2011)

34. Mind the Gap: When Is Enough Too Much? From 2004 to 2007, the incomes of America’s top 0.01 percent shot up 54.4 percent. The income jump for America’s bottom 90 percent only rose 4.1 percent. The top 300,000 Americans now enjoy almost as much income as the bottom 150 million.16 Since 1992, the Internal Revenue Service has compiled data from the returns of the 400 Americans reporting the largest income. The top 400 then had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion—$227 million

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on average—but the rate paid had fallen to 18.1 percent. The tax rates paid by the top 400 have plummeted since the mid-1990s, when their average effective rates were about 30 percent.17 The estate tax (which only hits the top 2 percent) has been slashed. In 2000 it was 55 percent and kicked in after $1 million. In 2010, it was zero. Today it’s 35 percent and begins at $5 million. The richest 0.1 percent of Americans have seen their share of pretax national income rise from less than 3 percent in 1970 to more than 12 percent in 2007—the highest proportion since the creation of the income tax in 1913.18 The 20 U.S. banks that received the most bailout dollars have laid off 160,000 workers. Meanwhile, the 100 top executives at these 20 banks in 2008 collected a combined $791.5 million in personal compensation.19 From 1960 to 2004, the top 0.1 percent of U.S. taxpayers saw the share of their income paid in total federal taxes drop from 60 to 33.6 percent.20 America’s highest income earners—the top 400—have seen the share of income they pay in federal income tax plummet from 51.2 percent in 1955 to 16.6 percent in 2007.21 Tax cuts for the wealthy between 2001 and 2008 cost the U.S. Treasury $700 billion, with all of these billions added directly to the national debt.22 The wealth gap is even greater than the income gap. The richest 20 percent own 75 percent of all assets. The poorest 20 percent own no assets at all.23 What’s more, this disparity in wealth is far greater than disparities in income. Whereas the top 1 percent of earners earn 20 percent of all income, the wealthiest 1 percent of Americans own more than 33 percent of the country’s wealth.24 The gaps are helped along by tax loopholes, government subsidies, inflation, and the natural process of money attracting money (familiar if you’ve ever played Monopoly). For example, an affluent investment banker who has a $1 million mortgage and pays $40,000 in mortgage interest each year receives a housing subsidy of $14,000 annually. (The banker pays 65 cents of every dollar of mortgage interest, and taxpayers pick up the remaining 35 cents.) By contrast, a typical middle-class family, such as a welder or a nurse making $60,000 and paying $10,000 a year in mortgage interest on a more modest home, will receive a housing subsidy worth $1,500 annually. Here, the family pays 85 cents of every dollar of mortgage interest and taxpayers pick up just 15 cents.25

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In 2010, the total net worth of all persons in the United States was $58.1 million. The population in 2010 was 308.7 million. Thus, the average net worth was $188,209, or $236,213 per adult. The gap is not narrowing. In 1958, the top 1 percent owned 26.9 percent of the wealth. In 1969, it was 25.6 percent. In 1972, it was 25.9 percent. In 2010, it was 35 percent. On average, home values have fallen almost a third since the popping of the housing bubble. Millions have lost their homes; about 6.4 million mortgages are delinquent, with many headed toward foreclosure. Almost one in four homeowners with a mortgage is underwater, owing more than the property’s worth. They can’t refinance to take advantage of lower interest rates. “The wealthy have not been paying their fair share. When I was younger, I remember there were rich people then and they seemed to live a good life when they were paying 50 and 60 percent of their income in taxes. They still had their yacht and their mansion and their summer home, and no one really minded because they also built the factories and created jobs and let all of us have a roof over our head. That’s not the way it is anymore. They weren’t satisfied with what they already had. They wanted more and more and more.” (Michael Moore, Academy Award winning filmmaker, MSNBC, Lawrence O’Donnell Show, October 25, 2011)

35. How Did We Wind up With so Much Wealth Inequality? The tax code is one reason why. Under the tax system, the work of money brings a bigger reward than the work of people. People who work for a living pay more tax on equal earnings than people who don’t work. The marginal (highest) tax rate for a working individual is 35 percent. But for an investor in capital gains (stocks, real estate, and so on), it’s only 15 percent. And for investors in municipal bonds, the tax rate is zero. For example, three persons, each of whom earn $60,000, paid tax in 2010 as given in table 6.1. Table 6.1

Earnings, Wages, Tax Rates Annual Earnings

Source of Earnings

Tax Paid

Tax rate 26

$60,000 $60,000 $60,000

Wages Capital gains Municipal bonds

$11,188 9,000 0

18.6 15.0 0

Bob Mary Tom

Source : Created by author.

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The traditional payroll tax paid by employees is 7.65 percent (6.2 percent for Social Security and 1.45 percent for Medicare). Each employer matches those taxes. However, once an employee reaches $106,800 in earnings (the maximum for 2010), the tax stops. 27 So, a worker who makes $60,000 has 7.65 percent ($4590) deducted from his or her paycheck. But a worker who makes $500,000 a year only has the maximum $8,170.20 deducted (7.65 percent ⫻ $106,800). That’s only 1.6 percent of his or her salary.28 And if a person’s earnings all come from investments, the individual pays zero payroll taxes. A Time poll showed 73 percent of Americans favor raising taxes on those with annual incomes of $1 million or more to help cut the federal deficit.29 “Money made by money should be taxed at the same rate as money made by people.” (U.S. Senator and 1972 Democratic Presidential Candidate George McGovern, campaign speech in Los Angeles, June 1, 1972)

36. What Is the “Buffett Rule?” In his September 19, 2011 speech outlining his deficit-reducing plans, President Barack Obama proposed what he called the “Buffett Rule.” The “rule” is a guiding principle that the super wealthy should not pay a lower rate of federal tax than the middle class. Billionaire Warren Buffett has long criticized the loopholes in the tax code that allow him to pay an effective tax rate of 17.4 percent while his secretary, who earns $60,000 a year, pays an effective tax rate around 30 percent. The Buffett Rule is the idea that the tax rules should be changed to reduce or eliminate this unfairness. In an op-ed in the New York Times on August 14, 2011, Buffett wrote: “Last year what I paid was only 17.4 percent of my taxable income. And that’s actually a lower percentage than was paid by any of the other 20 people in our office.” Two features of our tax code primarily drive Buffett’s lower rates. The first is that most of Buffett’s income is investment income in the form of dividends and long-term capital gains that is taxed at a preferential low rate of 15 percent, while income from work is taxed at ordinary income tax rates ranging from 10 to 35 percent. The second is that while probably all of his secretary’s income is subject to payroll taxes, most of his income is not.

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Taxpayers with $10 million or more in investment income this year will pay an average 17.2 percent of their income in federal income taxes and payroll taxes, very close to the 17.4 percent Warren Buffett pays.30 That’s why a few people are wealthy and why most of us are struggling to make ends meet. It makes no sense that someone who makes millions from work (like a professional athlete or a corporate executive) pays more in taxes than someone who makes millions from investments. But it’s completely unfair when millionaire investors pay effective tax rates far lower than those of most middle-income people. Specifically, a “Buffett Rule” introduced in Congress in January 2012, by U.S. Senator Sheldon Whitehouse (D-RI), would not tamper with existing tax rates. Instead, those making more than 1 million dollars a year would be required to calculate their overall tax rate. If those amounts add up to less than 30 percent, they would be required to make up the difference. On April 16, 2012, the Senate voted, 51–45, in favor of the bill. But it needed 60 votes to pass. A basic income would contribute greatly to the redistribution of income and help to narrow some of the worst gaps of wealth in this country. “Don’t tax you. Don’t tax me. Tax that fellow behind the tree.” (Senator Russell Long of Louisiana during the FAP debates of the 1970s)

37. But Aren’t You Suggesting “DoubleTaxation” on the Same Earnings? Proponents of lower or zero tax rates on capital gains, property, or estates argue that to tax these items constitutes “double taxation.” But there is no general principle that says income or property gets taxed only once. On any given day, we are all subject to a variety of state and federal taxes. For instance, your earnings are subject to both income and payroll taxes, and that money is taxed again when you pay sales tax on your purchases and property taxes on your home.

38. But Isn’t This “Class Warfare?” No. There were 1,470 households that reported income of more than $1 million in 2009 but paid zero federal income tax on it.31

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The average federal income tax rate of the richest 400 people in the country in 2008 was 18.1 percent. In 2007, it was 16.6 percent.32 One-fourth of those with incomes of more than $1 million a year pay income and payroll tax of 12.6 percent of their income or less, putting their tax burden below that of many in the middle class.33 Chief executives of the nation’s largest companies earn more than $11 million on average, 343 times more than the typical worker. In 1980, Business Week magazine estimated top execs made a mere 42 times the pay of factory workers.34 A new study that profiles 280 of America’s most profitable companies found that 78 of them paid no federal income tax in at least one of the last three years. Thirty companies enjoyed a negative income tax rate over the three-year period, despite combined pretax profits of $160 billion. These 280 corporations received a total of nearly $223 billion in tax subsidies.35 “Americans have been uncomfortable for a long time talking about class. It’s a very intense taboo. We have this very strong self-image of equality and image that anyone can make it. The idea that there is a strong class system undercuts the claims we cherish most. Yet there is a strong class system in the U.S.” (Joan Williams, professor at the University of California Hastings College of Law and author of Reshaping the Work-Family Debate: Why Men and Class Matter (Cambridge, MA: Harvard University Press, 2010)) “This isn’t class warfare; it’s math.” (President Barack Obama, national television address, September 19, 2011)

39. But Nearly Half of Americans Pay No Income Tax At All. Shouldn’t Everyone Have Some “Skin in the Game?” In 2010, 46.5 percent of tax filers paid no income tax, up from the 21.2 percent average during the 1990s. The federal government imposes many different taxes through different mechanisms, and it is a household’s total tax obligation that is the most meaningful. It’s absolutely not true that some Americans “have no skin in the game.”36 The lowest 20 percent of income earners (less than $18,000 a year; average $10,700) paid 10.9 percent of income in state and local taxes.37

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Calculations of effective federal tax rates should at least include federal income taxes and payroll taxes. The fact is that many households pay more in federal payroll taxes than in federal income taxes and that payroll taxes make up more than a third of total federal revenue.38 Moreover, most people who pay no income taxes at all are typically disabled, elderly, or poor, a fact rarely mentioned by those who make this complaint. “In the long run, this country will not be a good place for any of us to live unless it is a reasonably good place for all of us to live in.” (Presidential candidate Theodore Roosevelt, campaign speech, New York City, October 1912)

40. Whatever Happened to Reaganomics? The 1981 Reagan tax cuts were allegedly based on the premise that if you give tax breaks to the rich and to business, the economy would be stimulated and more tax money, not less, would flow to the U.S. Treasury. It didn’t work out that way. Business did not invest its tax savings in new equipment or new jobs. Reagan promised a balanced budget, but deficits increased. Reagan predicted more jobs, but unemployment rose. Reagan forecast a booming economy, but the recession deepened. Inflation cooled, but productivity slowed. Even Reagan’s own budget director, David Stockman, admitted that the real purpose of the 1981 tax cuts was “to lower the top tax rate from 70 percent to 50 percent,” as Stockman told William Greider of the Atlantic Monthly, July 1989. Stockman admitted that the whole Reagan supply-side economic theory was really new clothes for the old “trickle-down” theory— that if you give tax breaks to the rich, money will supposedly trickle down through the economy to reach everyone else. “It’s kind of hard to sell ‘trickle-down,’” Stockman said. “So the supply-side formula was the only way to get a tax policy that was really ‘trickle-down.’ Supply-side is ‘trickle-down’ theory.” “In my youth, we called the ‘trickle-down theory’ the ‘horse-andsparrow’ theory. If you feed the horse enough oats, some will pass through to the road for the sparrows.” (John Kenneth Galbraith, The Affluent Society (Boston: Houghton Mifflin, 1958))

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41. But Don’t Many Politicians Still Support Trickle-down Economics? Yes. The discredited theory was the centerpiece of President Bush’s tax cuts of 2001 and 2003. To this day, some politicians falsely claim that by lowering taxes you can increase revenues. This theory defies common sense and was once called “voodoo economics” by 1980 Republican presidential candidate (and later president) George H. W. Bush.39 Yet, despite mountains of evidence to the contrary, the myth conveniently persists at the highest levels of the U.S. government as a rationale to lower taxes on the wealthy. Just a few examples: • From 1955 to 1970, the average top tax rate was 82.3 percent. The growth rate averaged 3.6 percent and unemployment averaged 4.9 percent. From 1981 to 2010, the average top tax rate was 39.3 percent. The annual growth rate was only 2.8 percent and the average unemployment rate climbed to 6.3 percent. • From the end of World War II until 1981, the richest Americans faced a top marginal tax rate of 70 percent or above. Under President Dwight Eisenhower, it was 91 percent. Even after all deductions and credits, the top taxes on the very rich were far higher than they’ve been since. Yet the economy grew faster during those years than it has since. And the annual federal deficit never once hit as high as 3 percent of GDP and only once hit as high as 2 percent. In 2011, it was 8 percent ($1.2 trillion/$14.7 trillion). • The economy was thriving under high tax rates. GDP grew by leaps and bounds each year. The middle class was thriving. We were building highways, schools, cars, and more. We were shocked at the ghastly inequality of income in Brazil, Argentina, India, and other third world countries. Back in the mid-twentieth century, even celebrated conservative thinkers—such as University of Chicago economist Henry Simon, an influential free marketer who consistently promoted progressive taxation—could and did support steep tax rates on high incomes. Today, the revenue coming into the U.S. government is 15 percent of GDP, which is the lowest since the Korean War. In the past 20 years, it has been 19 to 20 percent.40

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Four years after President Clinton’s 1993 tax increase, which GOP opponents denounced as a certain job killer, the economy had produced 11.8 million new jobs, an increase of nearly 11 percent. Eight years after the tax increase, the economy had added 20.6 million jobs, up 18.6 percent. Eight years after Bush signed his tax cut (and added another round of reductions in 2003), nearly 1.6 million fewer Americans were at work.41 In 1980, individual tax receipts were 9.4 percent of GDP. In 2010, they were only 6.3 percent—a hefty decline of 33 percent. The IRS reports that the adjusted gross income (AGI) reported on 2009 tax returns was $7.6 trillion, a 7.7 percent drop from the previous year. This was the second year in a row that AGI had decreased. How the rich, in just 30-odd years, have been able to convince middle America that lowering tax rates on the wealthy to 50 percent and then to 35 percent (and 15 percent for the really rich) would be a good thing for America is one of the great mysteries of our time. “Capitalism can only survive in a democracy if the general public benefits from it, and this involves redistributing its bounty, which otherwise ends up concentrated in the hands of the few.” (Conservative “Chicago School” economist Henry Simon, Economic Policy for a Free Society (University of Chicago Press, 1948))

42. Is There a Chart Showing What Happened to Federal Revenues When Tax Rates Were Raised and Lowered? Yes. Here it is (see table 6.2). Table 6.2 Federal Revenue vs. Income Tax Rates Total Federal Year 1950 1951 1952 1953 1954 1955 1956 1957 1958

Top Tax Rate 42 Revenues (billions)43 Percent increase 91 91 91 91 91 91 91 91 91

39.4 51.6 66.2 69.6 69.7 65.5 74.6 80.0 79.6

31.0 28.3 5.1 0.1 ⫺6.0 13.9 7.2 ⫺0.1 continued

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Table 6.2 Continued Total Federal Year 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 3rd Quarter 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

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Top Tax Rate 91 91 91 80 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 70 50 50 50 50 50 28 28 28 28 28 31 31 39.6 39.6 39.6 39.6 39.6 39.6 39.6 39.6 39.6

Revenues (billions) 79.2 92.6 94.4 99.7 106.6 112.6 116.8 130.8 148.8 153.0 186.9 192.8 187.1 207.3 230.8 263.2 279.1 298.1 81.2 44 355.6 399.6 463.3 517.1 599.3 617.8 600.6 666.5 734.1 769.2 854.4 909.3 991.2 1,032.1 1,055.1 1,091.3 1,154.4 1,258.6 1,351.8 1,453.1 1,579.3 1,721.8 1,827.5 2,025.2 1,991.2

Percent increase ⫺0.1 16.9 1.9 5.7 6.9 5.6 3.7 12.0 13.8 2.8 22.2 3.2 ⫺3.0 10.8 11.3 14.0 6.0 6.8 19.3 12.4 15.9 11.6 15.9 3.1 ⫺2.8 10.9 10.1 4.8 11.1 6.4 9.1 4.1 2.2 3.4 5.8 9.0 6.6 7.5 8.7 9.0 6.1 10.8 ⫺1.7

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WHY INEQUALITY IN THE UNITED STATES?

43

Total Federal Year 2002 2003 2004 2005 2006 2007 2008 2009 2010

Top Tax Rate 38.6 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0

Revenues (billions) 1,853.2 1,782.3 1,880.1 2,153.6 2,406.9 2,568.0 2,524.0 2,105.0 2,162.7

Percent increase ⫺6.9 ⫺3.8 5.5 14.5 11.8 6.7 ⫺l.7 ⫺16.6 2.7

Source : Created by author.

43. Very Impressive. But What Do All Those Figures Mean? Well, from 1950 to 1961, when the top marginal tax rate was 91 percent, the average annual growth in revenues was 9.8 percent. From 1962 to 1981, when the top marginal tax rate was 70 percent, the average annual growth in revenues was also 9.8 percent. But from 1982 to 1992, when the Reagan tax cuts took hold and the top marginal tax rate dropped to as low as 28 percent, the average annual growth in revenues fell to 5.5 percent. When President Clinton raised the top rate to 39.6 percent in 1993, the average annual growth in revenues from 1993 to 2001 jumped to 6.9 percent. And when President Bush lowered the top tax rate to 35.0 percent in 2001, the average annual growth in revenues from 2002 to 2010 plummeted to 1.4 percent. In fiscal 1981 (ending September 30, 1981), the last year before the Reagan cuts kicked in, revenues were $599 billion, 15.9 percent more than 1980. But in fiscal 1982, the first year of the Reagan cuts, revenues were $618 billion, only a 3.1 percent increase over 1981. And in 1983, revenues were $600.6 billion, a 2.8 percent drop from 1982. The increase in revenues in the Nixon/Ford/Carter 1970s was 168.2 percent ($517.l billion in 1980 vs. $192.8 billion in 1970), whereas the increase in revenues in the Reagan 1980s was only 99.6 percent ($1,032.0 in 1990 vs. $517.1 billion in 1980). In the early 1990s, with the rates still at 28 percent to 31 percent, revenues increased 4.1 percent (1990), 2.2 percent (1991), and

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3.4 percent (1992). Then the 1993 Clinton tax increases took hold and revenue increase was 5.8 percent (1993), 9.0 percent (1994), 6.6 percent (1995), 7.5 percent (1996), 8.7 percent (1997), 9.0 percent (1998), 6.1 percent (1999), and 10.8 percent (2000). Bush comes in and lowers tax rates in 2001. In fiscal 2001, revenues dropped 1.7 percent; in 2002, revenues dropped 6.9 percent; in 2003, revenues dropped 3.8 percent. There was an increase of 5 percent in 2004, 14 percent in 2005, and 11.7 percent in 2006, even with the Bush tax cuts still in place. Fine, but then it drops to 6.7 percent in 2007, minus 1.7 percent in 2008, minus 16.6 percent in 2009, and 2.7 percent in 2010. So it’s clear that lowering tax rates leads to lower tax revenues— exactly the opposite of what the trickle-downers claim. Certainly other factors can be involved, such as recessions, or dot-com busts, or the Internet movement. But the pure figures give solid evidence that higher marginal tax rates lead to higher federal revenues. “Most Americans’ wages (measured by the real median wage) began flattening under Reagan and have dropped since George W. Bush. Trickle-down economics is a cruel joke.” (Robert Reich, Labor Secretary under President Bill Clinton; Professor of Public Policy, University of California at Berkeley; author of Aftershock, MSNBC, Lawrence O’Donnell show, October 2011)

44. Wouldn’t Small Business be Hurt by a Higher Marginal Tax? No, fewer than 2 percent of small business owners are in the highest tax bracket.

45. But I Keep Hearing If We Lower Taxes on the Rich, They’ll Create Jobs. The rich don’t create jobs. We do. Lots of regular people having money to spend is what creates jobs and businesses. That is the basic idea of demand-side economics, and it works. In a consumer-driven economy designed to serve people, regular people with money in their pockets is what keeps everything going. And the equal opportunity of democracy with its reinvestment in infrastructure and education is fundamental to keeping a demand-side economy functioning.

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When all the money goes to a few at the top, everything breaks down. Taxing the people at the top and reinvesting the money into the democratic society is fundamental to keeping things going. Cutting taxes at the top steals from democracy’s ability to continue the reinvestment. More than 100 wealthy business owners and investors, including a number of millionaires, recognize that tax cuts for the rich are not good for America. They signed a letter stating the signers were willing to pay higher taxes, and did not want to see cuts to programs like Medicare that help everyday Americans. “As an upper-income taxpayer whose wealth was entirely earned, rather than inherited, I feel my success was in great part due to the egalitarian and meritocratic society I encountered when I came to the United States. That society has been all but destroyed by the current tax code. I find it grotesque that capital gains and dividends should be taxed lower than income from work.” (Arul Menezes, Research Manager, Microsoft Research, Seattle. From United for a Fair Economy, No Deal is Best Outcome for American People, Press Release, November 21, 2011)

46. Should We Give Tax Cuts and Tax Credits to Businesses so They Will Create Jobs? Businesses don’t create jobs. In fact, the way our economy is structured, the incentive is for businesses to get rid of as many jobs as they can. It costs money to pay employees. So businesses want to trim down to the minimum number required to get the needed work done. Hiring is expensive. It’s risky. The new person might not work out. Smart business people avoid hiring. An efficiently run business will already have the right number of employees. When a business sees that more people are coming in the door (demand) than there are employees to serve them, they hire people to serve the customers. When a business sees that not enough people are coming in the door and employees are sitting around reading the paper, they lay people off. Businesses want customers, not tax cuts. “I am willing to pay more taxes to save the American economy. As an investor, I make decisions based on the opportunity offered, not the tax rates for wealthy Americans.” (Phillippe Villers, President of Grainpro, Inc., Concord, Mass. From United for a Fair Economy, No Deal is Best Outcome for American People, Press Release, November 21, 2011)

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47. What Is the “Flat Tax?” Some politicians have endorsed the “Flat Tax.” The Flat Tax is a single-rate tax to replace the existing progressive federal personal income tax, corporation income tax, and estate and gift taxes. In February 2010, the Institute on Taxation and Economic Policy (ITEP) estimated that the Flat Tax proposed by then senator Arlen Specter of Pennsylvania would result in enormous tax cuts for the richest 5 percent of taxpayers, and that the richest 1 percent would receive an average $209,562 in 2010. The bottom 95 percent of taxpayers would pay an average of $2,887 more in federal taxes in 2010.45 Low-income Americans would lose the refundable credits that they receive under the current income tax. The form of income that mostly flows to the wealthy—investment income—would be exempt from the personal income component of the flat tax, while all compensation for work, including wages and even employer-provided health care benefits, would be taxed.

48. What Is the “Fair Tax?” Some politicians have also endorsed the “Fair Tax.” The Fair Tax would replace the federal personal income tax, the corporate income tax, and estate and gift taxes with a 23 percent national sales tax. (Some economists estimate that it is a 30 percent sales tax.) The tax would allegedly apply to all types of consumption, including those that would be difficult or impossible to tax in the real world (like rent and health care services). ITEP estimated the following: • The sales tax rate would have to be between 45 and 53 percent in order to truly raise as much revenue as the current federal tax system. • Poor and middle-class families would pay thousands of dollars more in federal taxes each year despite the rebate that proponents claim would mitigate the gross unfairness of the tax. • The bottom 80 percent of taxpayers would face an average tax increase of about $3,200 per year, while the top 1 percent of taxpayers would get average tax reductions of about $225,000 each per year.46

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49. What Is the Value Added Tax (VAT)? The Value Added Tax, or VAT, in the European Union is a general, broad-based consumption tax assessed on the value added to goods and services. It is charged as a percentage of price, which means that the actual tax burden is visible at each stage in the production and distribution chain. It is paid to the revenue authorities by the seller of the goods. The EU law requires that the standard VAT rate must be at least 15 percent, but actual rates vary. “Let me tell you about the very rich. They are different from you and me. They possess and enjoy early, and it does something to them; makes them soft where we are hard, and cynical where we are trustful in a way that, unless you were born rich, it is very difficult to understand.” (F. Scott Fitzgerald, The Great Gatsby, Charles Scribner’s Sons , April 10, 1925 (Reprinted by Columbia University Press, 1999))

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How Do Other Countries Handle Economic Security?

Of all rich countries, America is the one which has the worst and biggest slums, and which is least generous in giving economic security to its old people, its children, its sick people, and its invalids. —Gunnar Myrdal, Swedish economist, Challenge to Affluence (New York: Random House, 1963)

50. Doesn’t the United States Do More for Its People than Any Other Nation in the History of the World? No. As a percentage of national output, the United States ranks 25th in the world in social welfare spending (see table 7.1). The United States lags far behind most industrialized nations in government programs providing child care service. Most nations offer family allowances to supplement parental earnings when they have children. Most have maternity benefits and leaves of 14 weeks to nine months to allow mothers—and, in Sweden, fathers—opportunity to develop a strong relationship with infants before returning to work. Most have special housing allowances or priorities for families with children. Poverty in Sweden, Denmark, Norway, Netherlands, and Switzerland has all but been eliminated. There are no slums. No skid rows. Everyone has the right to live. Everyone is provided with adequate medical care and unemployment compensation. The aged are given a good retirement pension. Sweden offers free prenatal care and child delivery, generous old age pensions and funeral support, an annual allowance for each child until he or she reaches 16, home-furnishing loans for newlyweds, rent rebates for large families, and special pensions for widows, orphans, and invalids.

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Table 7.1 Percent of GDP Spent on Social Programs by Advanced Nations 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.

France Sweden Austria Belgium Denmark Germany Italy Finland Hungary Portugal Spain Greece Norway Luxembourg United Kingdom Slovenia Netherlands Poland Czech Republic Japan Switzerland New Zealand Canada Ireland UNITED STATES Australia Slovak Republic Israel Iceland Estonia Chile Turkey Korea Mexico

28.4 27.3 26.4 26.3 26.1 25.2 24.9 24.8 22.9 22.5 21.6 21.3 20.8 20.6 20.5 20.3 20.1 19.8 18.8 18.7 18.5 18.4 16.9 16.3 16.2 16.0 15.7 15.5 14.6 13.0 10.6 10.5 7.6 7.2

Source : OECD (Organization for Economic Cooperation and Development), 2007.

“Man, from birth to death, has the right to be protected by the community. All of France’s social legislation is dominated by the determination never again to place man in the position of begging.” (French Constitution)

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51. But Doesn’t the United States Have Higher Tax Rates than Other Countries? No. Among 32 advanced nations, 26 tax their citizens more than the United States does (see table 7.2). Table 7.2 Tax Revenues as a percent of GDP by Advanced Nations 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32.

Denmark Sweden Finland Belgium France Netherlands Austria Hungary Norway Italy Slovenia New Zealand Poland Czech Republic Germany Luxembourg Israel Canada United Kingdom Ireland Spain Iceland Portugal Greece Australia Switzerland UNITED STATES Japan Korea Chile Turkey Mexico

48.3 47.5 45.7 43.5 42.9 41.5 41.4 41.3 40.9 40.1 39.2 38.2 38.2 37.6 37.2 37.1 37.0 35.6 34.0 32.5 32.1 31.2 30.9 28.9 28.0 27.7 27.3 26.6 20.0 19.0 16.3 15.2

Source : OECD (Organization of Economic Cooperation and Development); 2007.

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52. What Are the Benefits of Europe’s High Tax Rates? Most taxes are paid by the upper-income groups. In the United States, by contrast, many wealthy families pay tax at a lower rate than middle-income and low-income families. The 2001 and 2003 tax cuts added $2.5 trillion to our national debt and disproportionately benefitted the richest 5 percent of Americans.1 In return for their taxes, Europeans also are receiving affordable child care, free or inexpensive university education, paid sick leave, paid parental leave, job training, ample vacations, affordable housing, senior care, efficient mass transportation, and more. People are secure; few go hungry. Germans work less, make more per hour, and get much better parental leave than Americans, many of whom get no fringe benefits such as health care, pensions, or even a retirement savings plan. By many criteria, the vast majority live better in Germany than in America. To achieve this, unmarried Germans, on average, pay 52 percent of their income in taxes. Americans average 30 percent.2 The German tax burden seems high. But in Germany—as well as in Britain, France, Scandinavia, Canada, Australia, and Japan—taxsupported institutions provide many of the things Americans pay for with after-tax dollars. A proper comparison would take the 30 percent average tax on American workers, add their out-of-pocket spending on health care, college tuition, and fees for services, and compare that with taxes that the average German pays. Add it all up and the combination of tax and personal spending is roughly equal in both countries, but with a large risk of catastrophic loss in America, and a small risk in Germany. Americans take on $85 billion of debt each year for higher education, while college is financed by taxes in Germany and tuition is cheap to free in other Western countries. While soaring medical cost is a key reason that since 1980 bankruptcy in America has increased 15 times faster than population growth, no one in Germany or the rest of the modern world goes broke because of accident or illness. And child poverty in America is the highest among advanced nations— almost twice the rate in Germany.3 Generally, one-third of the population in Europe supports the other two-thirds, because they’re able to. They realize everyone can’t compete on an equal level. There’s more compassion; there’s a greater

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feeling of community toward each other than we have in the United States. Some European countries are raising taxes. The former prime minister of Italy, Silvio Berlusconi, decreed a new 10 percent surcharge on incomes over 150,000 Euros, about $215,000. The unions want a one-time 10 percent tax on wealth that exempts only the value of a family’s principal residence. In 2010, the British upped the tax rate on income over about $223,000 from 40 to 50 percent. On February 27, 2012, in a national TV interview, the candidate leading in the public opinion polls for the French presidential race— the Socialist Party’s François Hollande—called for a 75 percent super tax on all individual income over 1 million Euros—the equivalent of about $1.33 million. In a Financial Times commentary in November 2011, Hassan Heikal, the CEO of EFG Hermes, the top investment bank in the Middle East, called for a one-time “global wealth tax” of 10 to 20 percent on all individual net worth over $10 million. While 49 million Americans don’t have any health insurance, many who do are paying hefty, and growing, premiums. There are side benefits to providing security for everyone. There is practically no “crime in the streets” in Scandinavia. Men and women walk the city streets alone at night without fear. The homicide rate is one-tenth of America’s. And, with it all, the assumption remains that people have to look after themselves. The custodial quality of American welfare is not to be found elsewhere. The French Constitution states: “The nation shall guarantee to all, and particularly to the child, the mother, and the aged worker, protection of health, material security, rest and leisure. Any individual who, because of his or her age, his or her physical or mental condition, or because of the economic situation, shall find himself or herself unable to work, shall have the right to obtain from the community the means of a decent existence.” It’s an example for the United States to follow. “When you sum up the total balance sheet, it turns out that Americans pay out just as much as Europeans—but we receive a lot less for our money.” Steven Hill, author of “Europe’s Promise: Why the European Way is the Best Hope in an Insecure Age, 2010.” (From op-ed article in Los Angeles Daily News , April 15, 2010)

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Why Should the United States Adopt a Basic Income Guarantee?

A guaranteed income could, for the first time, free man from the threat of starvation, and thus make him truly free and independent from any economic threat. —Erich Fromm, psychoanalyst and philosopher, The Sane Society (Greenwich, CT: Fawcett Publications, 1955)

53. Why Should We Adopt a Basic Income Guarantee? Everyone has the right to live. Simply because one exists, one is entitled to certain inalienable human rights: life, liberty, and the pursuit of happiness. To secure these rights, everyone should be guaranteed a minimum income by the federal government—enough for food, shelter, and basic necessities. Humans must be fed, must be clothed, must be housed, must be protected from cold, must have transport to and from their jobs, must be trained and educated, must be able to pay taxes that support the fabric of society, and must have adequate health care in order to survive in today’s world and thus to be moderately happy and content. Everyone needs and should have the chance to secure those things without threat. But, for too many people in this country today, this is simply not the case. In fact, just the opposite is the case. In order to secure these very barest essentials of modern life, to keep body and soul, family and home, together, those needing jobs must toe the line to those who dispense the jobs.

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As a result, more than 46 million Americans live below the poverty line. Millions live in daily fear of losing their jobs. Millions can’t find jobs. Modern technology and the ups and downs in the economy are throwing too many out of work. A basic minimum income would put an end to that poverty. It would put an end to much of that fear. A basic income guarantee would provide economic security to everyone. It would give people the assurance that, no matter what happened, they wouldn’t starve. Loss of a job, or sickness, or even the death of a breadwinner, wouldn’t drive a family into the poorhouse. “I believe that the American people feel that with the high production, of which we are now capable, there is enough left over to prevent extreme hardship, and to give to all a minimum standard of decent living and to all children a fair opportunity to get a start in life.” (U.S. Senator Robert Taft of Ohio, often called “Mr. Republican,” Speech on floor of U.S. Senate, 1949)

54. What Would Be the Advantages of a Basic Income Guarantee? A basic income guarantee would provide economic security to everyone. It would be like an insurance policy for you, me, Uncle Charlie, and Aunt Jane. It would replace welfare, food stamps, unemployment insurance, and even Social Security. It would make us all breathe a little easier. We’d also be freer from social conformity if our economic circumstances couldn’t be used to control us. Much of what is wrong with America today is economic in nature. A person without enough money to live on is totally absorbed in his or her personal struggle and can’t begin to live a normal, productive life. A basic income guarantee would free us from the threat of starvation for the first time in history. It would revolutionize America—in a peaceful way. A basic income guarantee would help to create a class of people who could move up in a mobile society. It would eliminate much of the hopelessness that now affects the millions who can’t break out of the poverty cycle. A basic income guarantee would help close the wealth gap. Wild disparity between the rich and poor, inequity between the children of

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the poor and their classmates, and discrepancy between a future with promise and one filled with despair create a societal imbalance that will eventually lead to a societal collapse. A basic income guarantee would stimulate the economy and create jobs and opportunity. If people can’t buy the basic necessities of life, those goods and services aren’t produced. This, in turn, deprives other workers of jobs, thus reducing their incomes and consumption. For example, a recent Michigan study shows that every $1 of EITC spent generated $1.67 in new income. A dollar spent on food stamps produced $1.87. In other words, when we invest in these programs, we get a great return. A basic income guarantee would help to eliminate the present division of the population into two classes—those who pay and those who receive public funds. A basic income guarantee would end the bureaucracy of the current welfare system. It would end the demoralizing situations under which some people—the administrators of the programs—run other people’s lives. It would save enormous amounts of administrative costs. A basic income guarantee would be an efficient and effective solution to poverty and will retain individual freedom and work incentives while simplifying government social policy. No one would be destitute. Everyone would have the positive incentive to work, since any increase in income above the BIG could only improve his or her lifestyle. Husbands wouldn’t have to leave home anymore so their families could get welfare. Adopting a basic income guarantee could get people to where the jobs are. People wouldn’t have to fear the risk of trying new jobs or moving to another area. It would be possible to think ahead; to plan. People would have time to create, to think, to work in jobs that society needs but aren’t profitable today—person-to-person services such as a homemaker for a sick person, visitors for invalids, working with youth, and so on. A basic income guarantee would cut down on the migration of people to the cities. It would lessen the congestion and the pollution. Many people may well go back to the pleasures of small towns and country life where money goes farther. We should adopt a basic income because it would develop in us the spirit of community with one another. It would help bring a divided nation together. It would help people to trust one another.

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A basic income guarantee would help cut crime. People wouldn’t have to resort to stealing to obtain food for their families. It would provide us with economic freedom to go with our political freedom. Today, we take for granted rights that took decades of hard fighting to achieve: the right to free speech; the right to religious freedom; the right to vote; the right to free public education. Most Western nations even provide the right to free health care. But what about the right to economic security? To a basic minimum income? In the eighteenth century, we fought to win religious rights. In the nineteenth century, we struggled to secure political rights. In the twentieth century, we battled to gain civil rights and workers’ rights. The twenty-first century can be the century in which we finally achieve economic rights. A basic income guarantee would establish the principle that people have a right to live—regardless. The most important reason for the acceptance of the concept of a guaranteed income is that it might drastically enhance the freedom of the individual. Until now in human history, man has been limited in his freedom to act by two factors: the use of force on the part of the rulers (essentially their capacity to kill the dissenters); and, more importantly, the threat of starvation against all who were unwilling to accept the conditions of work and social existence that were imposed on them. Whoever was unwilling to accept these conditions, even if there was no other force used against him, was confronted with the threat of starvation. The principle prevailing throughout most of human history in the past and present is: ‘He who does not work shall not eat.’ This threat forced man not only to act in accordance with what was demanded of him, but also to think and to feel in such a way that he would not even be tempted to act differently. A guaranteed income could, for the first time, free man from that threat. Nobody would have to accept conditions of work merely because he otherwise would be afraid of starving. A talented or ambitious man could learn new skills to prepare himself for a different kind of occupation. People would learn to be no longer afraid, if they did not have to fear hunger. (This holds true, of course, only if there is also no political threat that inhibits man’s free thought, speech, and action.) Guaranteed income would not only establish freedom as a reality rather than a slogan, it would also establish a principle

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deeply rooted in Western religious and humanist tradition: man has the right to live, regardless. This right to live, to have food, shelter, medical care, education, etc., is an intrinsic human right that cannot be restricted by any condition, not even the one that must be socially “useful.” (Erich Fromm, “The Psychological Aspects of the Guaranteed Income,” in The Guaranteed Income, edited by Robert Theobald (Garden City, NY: Doubleday, 1966, 175–177))

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Is a Basic Income Guarantee Moral?

Human rights are God-given. Simply because one exists in the image of God, he is entitled to certain basic human rights, to the realization of his fullest potential. —Whitney M. Young Jr., Executive Director, National Urban League, 1961–1971 I was hungry and you gave me food. I was thirsty and you gave me drink. I was a stranger and you took me in. —Jesus Christ, New Testament, Matthew, 25:35

55. Does Everyone Have a Moral Right to a Share of the National Wealth? Yes. There’s a moral obligation to provide every man, woman, and child with a decent level of living. Your right to be, your right to simple existence, is not something for others to grant or withhold as an economic carrot. Or to give as a gift. It’s a universal right. Each of us has a moral right to the minimum physical conditions of life—air, water, food, and shelter—simply because we’re here. A basic income should be guaranteed as a legal right—an economic equivalent to the right of freedom of speech and religious liberty. This is perfectly consistent with our heritage. We acknowledge the inalienable right of everyone to “life,” as well as to “liberty” and the “pursuit of happiness.” In fact, none of these rights means a thing without the provision for life itself. The basic minimum income would be granted regardless of whether one was willing to work to earn it. It would represent an economic floor under which no one would have to fall.

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56. If Society Provides the Right to an Income, Doesn’t It Also Have the Right to Demand Responsibility from Those Who Receive It? Yes. It does, and it should. But by incentives, not by force. Because incentives will work better than force. Each of us has a moral right to an income from society, but each of us, in turn, has a moral responsibility to that society—a responsibility to contribute, to learn, to work, to give the best that we have. In his 2008 book, Peaceful, Positive Revolution, Steven Shafarman proposes that each person, in exchange for a basic income, voluntarily perform eight hours of “Citizen Service” each month. “You could serve in many different ways, according to your schedule and interests,” Shafarman suggests. “You might volunteer in your child’s or grandchild’s classroom or school PTA, train with police or fire department to assist in emergencies, care for an elderly neighbor or disabled relative, plant trees and help maintain a neighborhood park or garden, work with a church group or nonprofit agency, serve on a jury, join a community board or commission. Peer pressure would encourage everyone to serve.”

57. What about Those Who Choose Not to Fulfill Their Moral Responsibility? Legally, they’d be within their rights. But consider the price. They’d be: 1. 2. 3. 4. 5.

Forced to live on a bare subsistence income. Probably bored and frustrated by a lack of meaningful activity. Alone. Out of touch with everyone else. Without a function. Without a use. Without a goal. In effect, abnormal. A victim of mental pathology; a social outcast; handicapped; to be pitied, not envied; to be helped, not condemned.

People, by nature, aren’t lazy. On the contrary, we suffer from the results of inactivity. We might prefer not to work for a month or two, but the vast majority of us would beg to work—to do something— even if we weren’t paid for it. The fields of child development and mental illness offer abundant data on this. Misuse of the basic income would likely disappear after a short time, just as people wouldn’t overeat on sweets after a few weeks.

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But let’s be honest. A few people probably won’t work. But so what? There are freeloaders under any system. Take our legal system. It says a person is presumed innocent until proven guilty. Most jurors agree it’s better to let ten guilty people go free than to convict one innocent person. Apply the same logic. Isn’t it better to let one person cheat if we can provide help to ten others who really need it? The question we have to ask ourselves is what kind of a society do we want to live in? Should we tolerate vast discrepancies in wealth between the rich and the poor? Should we reject a potentially great new social program that would provide dignity and security to all Americans, just because we’re afraid some poor guy is going to chisel us out of a few nickels and dimes? Compare it to a family. Your son has the moral responsibility to cut the grass every Saturday. Ninety-five out of 100 sons will do it. Three of the remaining five will do it after some reasoning. The other two won’t. Do you starve him? Kick him out? No. You feed him and hope one day he’ll come around. “The State would acknowledge the duty to maintain the individual and his children at all times and to assure for them all of the necessities of a healthy life. The individual in his turn would acknowledge it to be his duty to divert his best efforts to the production of the wealth whereby alone the welfare of the community can be maintained.” (Lady Juliet Rhys Williams, Something to Look Forward To (London: Macdonald and Co, 1943))

58. Is It Moral for People to Be Given Income That They Haven’t Earned and May Not Deserve? There’s still a feeling that giving money to poor and unemployed people is a free handout to shiftless freeloaders who don’t deserve it. The work ethic maintains that everyone should work. Okay. But a lot of people believe we should only get what we deserve. That we should work for it. Many believe that people who are unemployed or live in poverty somehow lack character; that wealth and affluence come only to those who are deserving. But is a person who inherits a million dollars more deserving than a person who works hard for $300 a week?

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Is the son or daughter of a rich family more deserving than you are? Theologian Philip Wogaman recalled an advertisement in Newsweek Magazine placed by the Warner and Swasey Company of Cleveland. The ad had nothing to do with the company’s products, but talked about the declining role of individual self-reliance in American society. It took the form of a man’s thoughts about his childhood and how times had changed since “the good old days.” We never heard these modern phrases like “standard of living,” “subsistence level,” “minimum requirements.” Our standard of living was whatever my father . . . earned. Certainly no one ever gave a thought to my “problems.” They were mine, weren’t they? Mine to solve. Why should I expect anyone else to bother? If my father was laid off, we stopped spending on anything but food, and a lot less of that. My dad spent every waking hour looking for work— any work. We lived on savings and when they were gone, we moved in with relatives. If there had been no relatives, when every penny and every salable asset was gone, we would have gone to the only place left—the County Poor House. But that would have been an admission that we couldn’t take care of ourselves. I guess we didn’t have much. But we had something that was infinitely more important, infinitely more rewarding—we had self-respect, because whatever we had, however little it was, we earned.1 The tone of the ad, Wogaman noted, is contrary to almost every religion on earth. It stresses rank individualism instead of cooperation; self-centeredness instead of compassion for others. Note the last line: “Whatever we had, we earned.” Did we “earn” the gift of life, itself? Did we “earn” ten fingers, two legs, and a brain to think? Did we “earn” the love of a mother and father? Did we “earn” the air we breathe, the water we drink, or the earth with its vast resources? Did we “earn” the knowledge of thousands of years of civilization, the dedication and work of millions of people who came before us? All great religions warn against judging others. “Judge not, lest ye, too, be judged.” How can we presume to judge others? Who really knows enough about the real abilities of another person? Who knows the kinds of personal struggles someone else has to face? Who can understand the handicaps another person may have to live with? The key question is, do we really want to settle for dog-eat-dog individualism, or are we a compassionate people who care for each other? Is competition the real meaning of human life, or is there a

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deeper spirit in us in which we are brothers and sisters? When we look back on our lives, do we recall first and most fondly the financial success we achieved? Or do we remember the friends we made, the loves we shared, the family we raised? Are we really in a position to judge one another, in order to decide who “deserves” and who doesn’t deserve the right to a basic economic existence? Isn’t there a bit of arrogance in this? A bit of playing God? And even if we think that work is vital to a person’s personal and social fulfillment, why should we think that people will have to be forced in some way before they make the effort? Is the average person less interested in developing his or her fullest potential than a rich person? Shouldn’t we avoid moral judgments as to who does and who does not “deserve” a basic income guarantee? “We must do good to others, whether or not we think they deserve it. If we have to earn life and love, then what we do is more important than what we already are. In Christian teaching, what we are quite overshadows the question of what we do.” (Philip Wogaman, Guaranteed Annual Income: The Moral Issues (Abingdon Press, 1968))

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Why Should I Work to Support Welfare Chiselers?

When a child in a low-income area is five years old, we do all we can to help. Often we fail. Then, 20 poverty-filled and educationally-deprived years later, we call that same child a leech and a welfare chiseler. —Mary Sheahen, Psychiatric Social Worker and Pastoral Counselor, at family dinner table, Derwood, Maryland, August 1981

59. Why Should I Work to Support Welfare Chiselers? You shouldn’t. And you won’t. Not under a Basic Income Guarantee where everyone receives the same grant from the government. In the past, welfare was a dirty word. A “giveaway to shiftless freeloaders.” You heard it all the time. There’s “plenty of work out there. But a lot of people just don’t want to work. They’re lazy.” People who worked for a living—and paid taxes—often found it hard to understand those who don’t. But times have changed. The economic recession has driven millions of people who once worked into unemployment—sometimes permanently. A new compassion has arisen for people who worked all their lives, played by the rules, but got laid off and now find themselves in the unemployment line—through no fault of their own. Yet the idea that “there’s plenty of work out there” persists. Herman Cain, a prominent candidate for the Republican presidential nomination of 2012, said: “If you’re unemployed and poor and not rich, it’s your fault.”

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In other words, “I’ve got mine; you get yours.” And, by the way, “screw you.” Indeed, people are plain tired of government spending. Taxpayers want a balanced budget. The nation is afraid of both inflation and depression. Voters are in no mood to guarantee anyone’s income. You can’t blame them. And, yet, millions of America’s poor and unemployed receive very little government help. Unemployment compensation eventually runs out. Food stamps are not enough. The “welfare chiseler” became a kind of “folk-villain” in the latter part of the twentieth century. While the traditional American folk hero has been the self-made, rags-to-riches man, as deeply ingrained into the American system is the belief in a folk villain, the self-made poor person—lazy, immoral, and irresponsible.

60. Why Do so Many Americans Hate Welfare? The work ethic is one reason why. Former Teamster official Nicholas Kisburg said: “One reason why blue-collar guys hate welfare so much is that they feel, psychologically, that it threatens them. Working, bringing home the check each week, is one way of establishing their supremacy, to themselves and their families. Work is the one thing they have. When they see a guy getting a check for doing nothing, they go crazy.”1 Another reason is guilt. Most Americans now know the depths of poverty that exist in this country. But we don’t seem to be able to do much about it. And that bothers us. Politicians rarely mention the word “poverty.” Melvin Lerner, in Psychology Today, wrote: “If we can help a victim, we are inclined to do so. But God help the victim if we can’t. We’re likely to decide that he richly deserves everything that is happening to him.”2 In a series of experiments, Lerner found that most people get emotionally upset whenever they see innocent suffering, and any sense of responsibility for the suffering increases their pain. Most people aren’t indifferent to the suffering of others. In fact, just the reverse is probably true. We’re very vulnerable to the suffering of others. “But,” said Lerner, “we feel miserable and under stress when the hero—the good person—suffers. Yet we are indifferent or even pleased when the villain finally gets his just desserts. We all have a need to believe that our world is just—that the good are rewarded

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and the bad are punished. We care deeply about justice for ourselves and others. This need to see justice done causes us unbearable stress if the victim is beyond help, or if the person inflicting suffering is too powerful to resist.” Dr. Bruno Bettelheim noticed this process in the way many Germans living under the Nazis first reacted to the concentration camps. If the people seized by the Nazi police and put into camps were truly innocent, as they appeared to be, then the government was extremely unjust. This conclusion was too frightening for most Germans to accept, in spite of what they saw directly. They wanted to believe that they lived in a world governed by law and order. To maintain their sense of justice, if not their sanity, Germans convinced themselves that those who were sent to the concentration camps must have really deserved their fate. They were criminals of some kind and the government was merely protecting all good Germans from this criminal element. The average German citizen could then go about his daily life secure in the belief that his government, his world, was just. To some degree, the same process is at work in America today. Most Americans believe the poor are themselves responsible for their plight and society isn’t to blame. We’ve convinced ourselves that the typical welfare recipient is dishonest, lazy, and untrustworthy. We are thus able to live with the fact that millions of our fellow Americans are living and, indeed, dying in squalor. We can tell ourselves that they deserve what they’re getting. The facts, however, are different.

61. Why Does the Myth of the “Welfare Chiseler” Persist? It’s not only psychological. It’s orchestrated at the highest levels of society. One of the oldest, yet most effective, political tricks is to blame a country’s problems on one segment of the population. To find a sacrificial lamb. To direct the anger of the many against a few, so as to divert people’s attention from the real problems. Hitler did it in the 1930s against the Jews. To a much lesser degree, the United States has done it with the poor. They’re the most vulnerable. They have no money, no prestige, and no political clout. So it’s become the old story of turning one group—the taxpayers—against another group—the poor and unemployed; the worker against the downtrodden.

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62. But I Know Someone Who’s Getting Cash from the Government and Not Doing Anything. That’s a Rip-off. Maybe. It seems that each of us has a friend, or a friend of a friend, who’s ripping off the system one way or another. Maybe they’re getting phony disability. Maybe they’re collecting unemployment compensation and not looking for a job. Maybe they’re on welfare and loafing. Maybe they’re cheating on their income tax. Maybe we’re cheating on our income tax. Whatever, we know of someone who’s conning the system out of taxpayer dollars. So we rightfully get furious when we hear of cheating of any kind when we’re trying to do the right thing. Yet our compassionate side says: “Let’s take care of our brothers and sisters.” It’s a true emotional conflict. Maybe the tragedy of America in the twenty-first century is that we all feel we have to cheat a little here and there just to stay even with everyone else. We figure the government wastes our tax dollars anyway, so why give it to them. We’re going through a cynical period: Vietnam; Watergate; abscam; skyrocketing corporate profits while nearly 10 percent of our people are unemployed; huge salaries for CEOs, who make 450 times the average worker; the rich getting richer while the poor get poorer. We used to trust our government completely. Until it lied to us. Now we don’t trust it at all. We certainly don’t trust business. We barely trust each other. But the American people are better than that. We follow the example set by our leaders. When Roosevelt and Kennedy were presidents, this nation had spirit. We had faith and belief in ourselves and in each other. That spirit isn’t dead, it’s only sleeping. It can return. “There are two theories of prosperity and of well-being. The first theory is that if we make the rich richer, somehow they will let a part of their prosperity trickle down to the rest of us. The second theory is that if we make the average of mankind secure, their prosperity will rise upward, just as yeast rises up, through the ranks.” (Franklin D. Roosevelt, campaign address at Detroit, Mich., October 2, 1932)

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CH A P T ER

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Why Not Guarantee Everyone a Job?

Work requirements . . . cannot be used effectively in determining eligibility for aid, and are undesirable in any case. —President’s Commission on Income Maintenance Programs, 1969

63. Why Not Guarantee Everyone a Job? Isn’t a Paycheck Better than a Handout? Sure it is. But under our present labor structure, it’s impossible. How would you do it? A private business can’t guarantee a job to anyone who applies. And even if it could, 40 hours a week at the minimum wage of $7.25 an hour is only $290 a week or $15,109 per year. That’s not enough for a family of four. The 2010 poverty level for a family of four was $22,314. For a family of three, it was $17,568. We’ve always assumed the economy would provide exactly enough jobs for everyone; that every job would pay a living wage. But it just hasn’t worked out that way. Jobs are great. But they’re not enough. They won’t eliminate poverty. They won’t provide security for the American people. “A job guarantee gives what cannot be given. It implies that everyone could diminish effort and slackly accept pay without causing the entire system to decay. Make-work, despite the claims of altruism by its advocates, is more often selfish. It is done to satisfy the worker rather than the market.” (George Gilder, Wealth and Poverty (Basic Books; Harper’s, February 1979))

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64. Why Not Have the Government Guarantee Everyone a Job? At Decent Pay? This was the general principle behind the original 1973 HumphreyHawkins Bill. The bill said every U.S. citizen “able and willing to work” had the right to a job. If private enterprise couldn’t give everyone a job, then the Federal government would. The bill would have created a system of regional and local employment councils. The first draft of the bill said a person denied “the right to a job” could, in effect, sue the government to force it to provide employment. The bill had flaws. It defined full unemployment as several million people. It sowed the illusion that full employment was possible under the current labor system. Civil rights groups, labor organizations, and many progressive forces endorsed the bill. They lobbied strongly in Congress for its passage. The Nixon-Ford Administration termed it “unnecessary” and “threatening to free enterprise.” They kept it mired in House and Senate committees for two years. In 1976, presidential candidate Jimmy Carter wouldn’t endorse the bill. He felt it promised more than it could deliver. He eventually endorsed “the principles of Humphrey-Hawkins.” In 1977, a 6 percent official unemployment rate had become “acceptable” to government economists and politicians. The bill was weakened and reintroduced in the 95th Congress. But, like its predecessor, it went nowhere. In October 1978, a watered-down bill was finally passed. It didn’t mention the “right to a job.” Nor did it contain any mechanism for implementing that vanished right. It called for a 4 percent unemployment rate and a 3 percent inflation rate by 1983. Advocates of the bill said it was basically meaningless. The original Humphrey-Hawkins bill said everyone has the right to a job. What its backers really meant is that everyone has the right to live. To live, you need money. So the right to a job really meant the right to money, to a fair income. But the idea of a guaranteed income wasn’t very popular. “Right to a job” sounded better. In fact, in America today, it still does. The trouble with the “right-to-a-job” concept is: Who’s going to provide the job? Private industry? It can’t. There are over 14 million unemployed.

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Would the government pay people a salary while it tried to find them a job in private industry? It would be paying a salary for a long, long time to many. That’s really the same as a basic income guarantee. Would the government subsidize industry? Would it pay companies to hire the unemployed? Or would the government, itself, become the employer of last resort? If you couldn’t find a job in the private sector, would the government put you to work doing something? Just like the CCC and the WPA in the Depression? “Somehow liberals have been unable to acquire from life what conservatives seem to be endowed with at birth, namely, a healthy skepticism of the powers of government agencies to do good. The American national government is a superb instrument for redistributing power and wealth in our society. One person in 10 in the United States, for example, now gets a Social Security check every month. But as an instrument for providing services, especially in urban low-class areas, it is a highly unreliable device.” (Senator Daniel Moynihan, The Politics of a Guaranteed Income (New York: Random House, 1973))

65. Why Not Pay Subsidies to Private Enterprise in Order to Provide More Jobs? This has been done. In the hard-core JOBS program. In CETA. In the Workforce Investment Act. With new jobs tax credits. But it’s expensive and slow. President Obama’s 2009 stimulus package of $787 billion promised to create or save an estimated 4 million jobs. But that’s a cost of nearly $200,000 per job. That kind of money could provide a grant of $10,000 to 7.8 million people.

66. Why Not Make the Government the “Employer of Last Resort?” This means the government would create a job for everyone who wants to work. Congressman Dennis Kucinich of Ohio proposed this plan. On the surface, it seems like a good idea. But the President’s Commission on Income Maintenance Programs said it’s a bad idea and won’t work. It’s even more complicated than guaranteeing a basic income, more expensive, and virtually impossible.

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On the plus side: • It provides income for those able to work. • It might be productive, like building roads or public transit, or working on environmental problems. • It provides on-the-job training, which might eventually be used in private enterprise. • It provides payment for work, not as a dole. On the minus side: • It doesn’t provide a wage for those unable to work. • The government would have to create 14 million or more jobs. This isn’t possible, let alone practical. • Even if it were possible, the government would become a vast, monstrous employer. It would create even bigger bureaucracies than the ones we’re trying to get rid of. • It would cost more than providing a basic income guarantee to every citizen. • Once on the government payroll, it’s doubtful workers would ever move back into private enterprise jobs. • Many of the jobs created might be of the make-work variety. Digging a hole and filling it up. The destructive impact on morale of these programs is well known. • In every case, a lower governmental official would decide who was employable and who was not. Making the government the “employer of last resort” is not the way to go. The answer is to provide a basic income guarantee to everyone. Then provide each person with the incentive to find work in the private sector of the economy. If the government was the employer of last resort, there’s another problem. What kinds of work would be considered worthy to be included in such a program? Should we force a mother to take a job that is more “useful” than raising her children? The role of a mother is one of the foundations of our civilization. Yet we still hear people talk about forcing welfare mothers to do something to earn their welfare checks. Even Congress passed a law saying that welfare mothers could be made to accept job training as a condition of their eligibility. Does this mean that being a mother and raising children are no longer meaningful?

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Think of all the countless number of meaningful jobs that are performed every day with no pay by thousands of dedicated volunteer workers. What would happen if suddenly nobody was willing to perform the vitally needed volunteer tasks with groups like the Red Cross, PTA, service clubs, Boy Scouts, YWCA, political action groups, League of Women Voters, Chamber of Commerce, hospital helpers, Big Brothers, and hundreds of others? Should we force government job-training on people who might otherwise spend their time in valuable activities such as these? Wouldn’t it be far better to provide everyone with the basic essentials of life so they would be free to spend their time in these and other activities that directly aid the community? Moreover, such a guaranteed job program assumes that the basic conditions of human life have to be earned. But why? Why not treat people’s basic economic existence as a legal right, and then provide incentives to work to gain more? The trouble with the guaranteed opportunity to work idea is that it doesn’t really come to grips with the question of how are we going to use our productive potential to insure the basic conditions of economic life for everyone? Why should it be necessary to force everybody to work? Wouldn’t it be better to begin to liberate ourselves from this necessity? The alternative to relying on financial incentives to work is to impose work requirements on applicants for aid and to deny aid to those who are deemed employable by some official. We believe that such tests cannot be used effectively in determining eligibility for aid, and are undesirable in any case. Inevitably, any simple test designed to withhold aid from the voluntarily unemployed will deal harshly with some of those who cannot find work. Any degree of complexity involved in the test would introduce elements of subjective evaluation to be exercised at the lowest administrative level. We do not think it desirable to put the power of determining whether an individual should work in the hands of a government agency when it can be left to individual choice and market incentives. Since we do not now have employment for all who want to work, employability tests lose much of their meaning in the aggregate. But they allow abuses in individual cases. Our observations have convinced us that the poor are not unlike the non-poor. Most of the poor want to work. They want to improve their potential and to be trained for better jobs. Like most Americans, the poor would like to do something with

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their lives beyond merely subsisting. By providing them with a basic system of income support, we provide them with an opportunity to do these things. (President’s Commission on Income Maintenance Programs, 1969)

67. But Shouldn’t We at Least Require Everyone to Take Training for a Job? No, for the same reasons as the last question. It wouldn’t help those unable to work. It would require a vast bureaucracy. It would be enormously expensive. It might not lead to a job, anyway. It does little good to train people if no jobs are available. Historically, government training programs have been corrupt, full of pork and favors. They’ve been ineffective and failed to produce even a fraction of the millions of needed long-term jobs. Yes, it’s obvious that there is a need for training people for jobs. But if you do it wrong, you’re just blowing taxpayer money. You just wind up with a better-trained unemployment pool. Some major government training programs have been: • the 1962 Manpower Development and Training Act; • the 1973 Comprehensive Employee Training Act (CETA); • the 1982 Job Training Partnership Act; and • the 1998 Workforce Investment Act. “Today there are 47 federal training programs costing the taxpayers $18 billion a year,” says James Bovard, author of Attention Deficit Democracy.1 “But the Labor Department has no expertise in training workers. Many workers in these programs developed bad work habits. Training programs provide good photo ops for politicians. They appear like they’re caring and generous. They promenade as saviors. No politician ever lost his job because he supported a job training program.” We seem to be reluctant to hand out cash directly to people, but we throw money at a variety of projects that are supposed to get people working, such as job-training programs, small-business aid, tax credits, and more. The point is, some job training programs can and do help. But we make a mistake when we try to force-feed job training to people if no jobs are available. We’re much more capable of making our own decisions than a governmental official who may or may not care. What if you wanted to go back to school for training, but didn’t have the money?

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Society could say: 1. Tough, go get a job. Then, if you couldn’t find a job, say: too bad. Or it could say: 2. Here are a few dollars to tide you over if you take this training program, which we think is best for you. Or, it could say: 3. Here are a few dollars to tide you over. Here are a few suggestions and training programs for you to consider. You know what’s best for you. Go do it. What if you wanted to train yourself for a job by working as an apprentice, or by studying at home? Would the government let you? Or would it require that you be supervised by a government official to qualify for aid? What if you wanted to write, or compose, or work on an invention—things that might prove beneficial to the community? Would government say: to get your minimum income, you must take the training that we decide is best for you? We know that most of us respond more favorably if we’re provided incentives rather than forced. If the bureaucracy is removed, if the climate is right, if the proper incentives are there, then people will want to work. The question is whether we believe that individuals need to be guided, guarded, and controlled in every facet of their lives. Or whether the judgment of the individual is usually better than that of a bureaucrat with little time or flexibility. Conservatives today have a perfect opportunity to make their point. “Some say that people don’t know what’s best for them. If you believe that people are too evil or stupid to govern their own lives, then you must also believe that they’re too evil or too stupid to govern the lives of others.” (Harry Browne, financial adviser and two-time Libertarian Party candidate for president, speech in Los Angeles, August 1980)

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CH A P T ER

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Why Not Try Other Programs?

To the conservative banality that “you can’t solve problems by throwing money at them,” I would answer: “Without spending money, social problems cannot be solved.” —Irving Howe, American literary and social critic and a prominent figure of the Democratic Socialists of America, Poverty, Views from the Left, with Jeremy Larner (New York: Apollo, 1962)

68. Why Not Increase the Food Stamp Program? Since 1970, the number of Americans receiving food stamps has grown from two million to 42.9 million in September 2010. This is one out of every seven Americans. It’s a large constituency.1 The Farm Bill that was passed in 2008 renamed the Food Stamp Program. It is now called the Supplemental Nutrition Assistance Program (SNAP). In fact, electronic benefits transfer is now in universal use, so there are no longer any stamps. Every dollar spent on SNAP benefits generates $1.79 in economic activity. For every $1 billion in food stamps, 17,900 full-time jobs are created.2 But SNAP requires government bureaucrats to check up on applicants’ income and wealth, which is costly and often demeaning to the recipient. Yet SNAP is vital to millions. Indeed, 3.9 million Americans were lifted from poverty in 2010 by this program.3 Benefits should be gradually phased out so that no one is hurt as we move toward a basic income guarantee.

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69. Why Not Raise the Level of the Minimum Wage? It’s not enough. The minimum wage has been raised slightly from time to time to try to keep pace with inflation ($7.25 per hour in 2010). But it doesn’t help the millions of people who are out of work. It’s not enough for millions more who work only part time. A full-time job of 40 hours a week at the minimum wage provides an annual income of only $15,109, not enough for a family of three or more.

70. Why Not Increase Social Security Benefits? As inflation goes up, Social Security payments go up. Retirees can get full Social Security benefits at age 66, a threshold gradually rising to age 67. Early retirees can get reduced benefits at 62. If you qualify for disability, you can get full benefits, based on your work history, even before 62. Increasing the payments even higher would help some people, but not some who need it most. Most of these benefits go to those who formerly had strong labor-force attachments. Under a BIG program, recipients of Social Security and other federal retirement programs will receive their current benefits or the BIG, whichever is higher. The Social Security system will be gradually phased into the BIG program.

71. Why Not Increase Unemployment Compensation Payments? Increasing unemployment benefits would help, since payment levels are below the poverty line in many states, and benefits are paid only for a specified number of weeks. But unemployment insurance fails to provide benefits for nearly two-thirds of total unemployment because of gaps in coverage and expiration of benefits.

72. Why Not Increase the Earned Income Tax Credit? The Earned Income Tax Credit (EITC) is a refundable federal income tax credit for low-income working individuals and families. Congress first created the program in 1975, in part to offset the burden of Social Security payroll taxes. It is designed to “make work pay.” It

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rewards low-wage work by decreasing the taxes that low-wage workers pay on their earnings and by supplementing their wages. The intent is to move a family with a full-time minimum-wage worker above the poverty line, so as to avoid raising children in poverty. The EITC is the largest poverty-reduction program in the United States. It lifted 5.4 million people above the poverty line in 2010.4 However, the maximum EITC credit that a single worker with no children could receive in 2010 was $457. So while the EITC is a commendable program for families with children, it does little to help poor single people. The credit would be completely phased out under a basic income guarantee program.

73. Why Not Give Family Allowances? A family allowance is giving, say, $25 a month to a family for each child. We already have a family allowance in the deduction for children and dependents on Form 1040, and in the Child Tax Credit of up to $1000 per child per year.

74. What about Increasing TANF Benefits? In 1996, Congress replaced the decades-old Aid to Families with Dependent Children (AFDC) program with the Temporary Assistance to Needy Families (TANF) block grant program. TANF reduced the number of recipients on welfare, but it did not reduce poverty. It imposed strict work requirements and established a five-year time limit on benefits. Benefits are now at least 20 percent below their 1996 levels in 34 states.5

75. Why Not Try “Baby Bonds,” Like England Did? In her 2008 presidential campaign, Senator Hillary Clinton proposed that each child should receive a stake of $5,000 at birth in the form of a “baby bond,” which would hopefully yield more than $10,000 by the time he or she became an adult. Clinton was building on a striking achievement by British Prime Minister Tony Blair, whose government passed legislation granting a “baby bond” to every British child born between 2002 and 2010 that provides a modest economic head start at age 18. But the conservative UK government of David Cameron has recently eliminated future baby-bonds as a “cost-saving” measure.

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76. Why Not Leave Welfare to the States? One of the goals of several 2012 Republican presidential candidates is to transfer welfare from Washington to the states. The theory is that local officials are in the best position to decide precisely how the money should be spent—“home folks taking care of home folks.” But it doesn’t work. Some state governments have neither the inclination nor the competence to handle welfare. Many states in this country have legislatures that are only in session for 60 to 90 days. That’s not nearly enough time to administer the kind of programs we need. When reformers wanted to abolish slavery in the nineteenth century, opponents said “leave it to the states.” When Social Security was first proposed, opponents said “leave it to the states.” When unemployment insurance was introduced, opponents said “leave it to the states.” When the Civil Rights Act was debated, opponents said “leave it to the states.” States rights meant separate drinking fountains, separate schools, separate and unequal lives. Today, state administration of federal programs such as TANF, Medicaid, and others is sometimes inefficient and often discriminatory. It would make about as much sense to turn national defense into a block grant program and rely on state National Guards for our security. The strength of any country is its people. They must be defended, not only from missiles from abroad but from hunger and poverty at home. We are one nation, with common problems. We need a national program, with equal benefits for all. Federal social programs should meet clear criteria: they should be national in scope, accountable, efficient, and fair.

77. Why Not Let Private Charities End Hunger and Poverty? They tried that in nineteenth-century England. The problem is too big. In 2007, the total of all private giving to combat poverty was equal only to 11 percent of government contributions.6 Ending poverty demands government help.

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78. Why Not Have the Government Contract With Private Industry for Socially Useful Projects? This we should do. It goes hand in hand with a basic income guarantee. Dozens of badly needed social projects can be undertaken, such as building low-cost transportation systems and developing pollution control devices. We need to build new homes and neighborhood health facilities. We also need to develop new energy sources, expand recreational facilities, and develop high-speed rail. Corporations capable of adjusting or expanding their facilities to meet the particular project needs would be given a contract by the government. Just as is done today with defense contracts. The company would then hire the necessary labor from the open market.

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C H A P T ER

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Can the United States Afford a Basic Income Guarantee?

When we ask: “What will it cost”? We make a mistake. We should ask: “To what are we committed”? In World War II, we didn’t say: “What will it cost to defeat Hitler”? We went out and did what we had to do. —Whitney M. Young Jr., Executive Director, National Urban League, 1961–1971

79. Can the United States Afford a Basic Income Guarantee? Yes. We are a wealthy nation. Our 2011 net worth was $58.1 trillion. Since the official 2010 population was 308.7 million, that’s an average of $188,200 for each man, woman, and child in the country. Our 2011 Gross Domestic Product was $14.7 trillion, an average of $47,643 per person. There are 173 separate tax loopholes (officially called “tax expenditures”) that could theoretically be eliminated to help pay for a BIG. And there are more than 100 welfare and social programs that would not be needed under a BIG. We are proposing a “full BIG” or a “big BIG” of an annual $10,000 per adult.

80. Will an Adult with Children Get Extra Money? Under our proposal, no. We are striving for simplicity and consistency, particularly with the idea of “citizens,” which means responsibility, accountability, and the right to vote.

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Politically, we want to get people talking about and debating details of the BIG idea. Some BIG advocates favor including children; some don’t. Including children is a compromise any BIG proponent would be happy to make. Meanwhile, we can always retain or increase the current refundable Child Tax Credit of up to $1,000 per child per year.

81. So What’s the BIG Deal? Each adult who files an income tax return receives an annual “BIG” or “refundable tax credit” of $10,000—just under the official 2010 poverty level of $11,139 for one person. The “refundable tax credit” is available to everyone, rich or poor, similar to Social Security, which enjoys wide support. (In contrast, the “Negative Income Tax” plans of the 1970s would have gone only to those in need, similar to welfare, which does not enjoy wide support.) All income other than this credit is taxed. If a person has no income at all, he or she keeps the full credit and pays no taxes. If a person has income of any kind (other than the credit), he or she must pay taxes. If one’s income is low, the amount to be paid in taxes will be less than the credit; the person will keep the difference and receive, in effect, a net transfer from the government. If one’s income is in the middle range, what is paid in taxes will be quite close to the amount of the credit and he or she will break even (as though no taxes were paid and no transfer received). If a person’s income is high, the amount to be paid in taxes will be larger than the credit received and, in effect, the person will pay out the difference in positive taxes. The important point is that the system is universal—everyone files a tax return, everyone gets a tax credit, and everyone with any income pays taxes. There is no means test, no work requirement, and no explicit eligibility criteria. No one receives a net transfer from the government unless the taxes on the person’s income from all sources are lower than the tax credit. Benefits under this program are paid as a matter of right rather than privilege and in a way that does not segregate and stigmatize the poor. The vital point about the BIG plan is that it involves a merger of the welfare system and the tax system. The plan is administered by the Internal Revenue Service as an extension of the positive tax system. Each recipient’s grant is electronically deposited monthly into a bank account, similar to the way the Social Security system operates.

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82. How Much Will a Basic Income Guarantee Cost? Based on the 2010 U.S. Census Bureau population reports, there are 308.7 million people living in the United States, a 9.7 percent increase from the 2000 population of 281.4 million. The annual gross cost of a BIG would be just under $2 trillion. See table 13.1 below. Based on data from the Alaska Permanent Fund and from IRS statistics, we estimate 2 percent of eligible recipients will not bother to file an income tax return. Two million prisoners will not receive the BIG. The BIG will be limited to those citizens who have lived in the United States at least five years, which, according to the Census Bureau, eliminates an estimated 3.2 million adults. Some social welfare programs will remain in place to handle those people. Thus, the net cost of the BIG is $1.89 trillion.

83. Can the United States Afford Nearly 2 Trillion Dollars? So how can the United States afford $1,889 billion (see table 13.1)? It’s a scary number. First, by eliminating some of the 173 tax loopholes. These include individual tax breaks, such as the deduction on home owner mortgage interest, property taxes, and charitable contributions; and corporate Table 13.1 Annual Cost of BIG Annual Cost of a BIG:

(billions)

194 million adults (age 18⫺64) ⫻ $10,000 ⫽ 75 million children (age 0⫺17) ⫻ $0 ⫽ 36 million seniors (age 65⫹) receive Social Security * Senior bonus Total Gross Cost Less savings from: Those who don’t apply (estimated 2%) 2 million prisoners ⫻ $10,000 Residents in USA less than five years: 3.2 million adults ⫻ $10,000 ⫽ Total Net Cost

$1,940 0 0 40 $1,980 ⫺39 ⫺20 ⫺32 $1,889

Note : *Recipients of Social Security and other federal retirement programs receive either their current benefits or the BIG, whichever is higher. The Social Security system will be gradually phased into the BIG program. Source : Created by author.

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tax breaks, such as accelerated depreciation of machinery, deferral of income from foreign corporations, and employer contributions for medical premiums and pensions. (See complete list in Appendix A.) The total of these 173 loopholes is $1,025 billion. Eliminating 80 percent of them would save $820 billion per year. Second, by eliminating the standard deduction and personal exemption from the tax code. This saves an additional $300 billion. (See Appendix A for calculations.) Third, by cutting more than 100 welfare programs, which will not be needed under a BIG. These include the Earned Income Tax Credit, Unemployment Compensation, Supplemental Security Income, and a variety of programs with heavy administrative costs, which economist Milton Friedman called “a ragbag of specific welfare programs” that have sprouted up over the years. (See complete list in Appendix A.) This saves $400 billion. Finally, by cutting the defense budget from its current $689 billion per year to its 2000 level of $295 billion. This saves another $394 billion. So the total savings come to $1,914 billion, more than the total BIG cost of $1,889 billion (see table 13.2). Since a BIG will cost $1,889 billion per year and our savings are $1,914 billion per year, we have covered the cost of a BIG. However, we can also find additional savings, through tax increases: First, by reversing the Bush tax cuts of 2001 and 2003. This raises an estimated $104 billion a year in taxes.1 Second, by going back to the higher income tax rates of 1994, which were 2.3 percent to 12 percent higher than 2010 rates. This raises an estimated $30 billion.2 Table 13.2

BIG Savings (all figures in billions)

Big Savings* 1. Elimination of some tax loopholes 2. Elimination of standard deduction and personal exemption 3. Elimination of some welfare programs 4. Cutting defense budget Total Savings

$820 300 400 394 $1,914

Note : *See Appendix A for complete list. Source : Created by author.

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Third, by further simplifying the tax code by eliminating the separate tax rates for “Married Filing Jointly,” “Married Filing Separately,” and “Head of Household.” Since the BIG is granted on an individual basis, there is no need for a variety of tax rate categories. We simply use the “single” tax rates from 1994, which were 1.2 percent to 31.7 percent higher than the “married filing jointly” rates. This raises an additional $60 billion.3 Fourth, by adding a surcharge of 20 percent to incomes over $1 million. This raises an additional $129 billion.4 Fifth, by extending the 12.4 percent payroll tax to all earned income, not just to those incomes under $106,800 a year. This raises another $220 billion.5 Sixth, by establishing a tax of one-fourth of 1 percent (.0025) on all stock transactions. For example, if someone purchases 100 shares of a $20 stock, the price is $2,000 plus commission. A tax of 0.0025, or $5.00, would be added to the cost. This would raise an estimated $100 billion. A side benefit might be to lower the number of day trades, thus bringing stability to a volatile stock market.6 Seventh, by instituting a 2 percent tax on wealth above $80,000 per individual. In their 1999 book The Stakeholder Society, Bruce Ackerman and Anne Alstott calculated this would generate $378 billion a year. Allowing for inflation since 1999, such a tax should now generate an estimated $450 billion a year. (David Stockman, President Reagan’s first budget director, wants to see America levy a onetime 15 percent surtax on the wealth of the wealthy.) Eighth, by raising the current tax rate on capital gains from 15 percent to 35 percent, the same rate paid by workers. This would raise an estimated $88 billion a year.7 Seventy five percent of the tax increase would be borne by the richest 1 percent of taxpayers.8 Ninth, by hiking the estate tax rate up to 65 percent for estates over $500 million. This would generate $7 billion a year.9 IRS data shows that only 0.6 percent of deaths in 2008 resulted in estate tax liability. Of the 5,500 estates expected to pay any tax under the 2009 rules, only about 100, or 1.8 percent, of those estates will have a majority of their assets in a small business or farm. And of those 100, the vast majority have sufficient cash to pay the tax.10 So that’s $1,188 billion in additional revenue to the Treasury. And that’s close to what’s needed to wipe out the 2010 budget deficit of $1,556 billion, or the estimated $1,267 billion deficit for 2011.

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Thus:

Cost of a BIG Savings New taxes Est. 2011 budget deficit New budget deficit

$1,889 ⫺1,914 ⫺1,188 1,267 $54

“Every gun that is made, every warship launched, every rocket fired, signifies, in the final sense, a theft from those who hunger and are not fed, from those who are cold and are not clothed . . . we pay for a single fighter plane with a half-million bushels of wheat. We pay for a single destroyer with new homes that could have housed 8000 people.” (President Dwight D. Eisenhower, April 16, 1953) “We spend $700 billion a year to ward off ‘risks’ from abroad, while we ignore realities at home. There is no way to justify this.” (Consumer activist and Green Party Presidential Candidate Ralph Nader, Speech in Santa Monica, California, September 2000)

84. How Does the Plan Work? Table 13.3 shows how the plan works for a single person, using the “single” tax rates of 1994.

Table 13.3 How Does BIG Work? Income 0 10,000 20,000 30,000 40,000 50,000 100,000 500,000 1,000,000 2,000,000

Tax

Tax Credit (BIG)

Net Tax

Net Income Tax Rate

0 1,500 3,000 5,450 8,250 11,050 26,390 178,639 376,639 972,639*

10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000

–10,000 –8,500 –7,000 –4,550 –1,750 1,050 16,390 168,639 366,639 962,639

10,000 18,500 27,000 34,550 41,750 48,950 83,610 311,361 633,361 1,037,361

0 0 0 0 0 2.1 16.4 33.7 36.7 48.1

Note : *Includes a 20 percent surcharge on incomes over $1 million. Source : Created by author.

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The break-even point under this plan is $46,250. Table 13.4 shows a summary of the fiscal year 2010 government revenues and expenses, the proposed changes, and the revenues and expenses under the BIG plan.

Table 13.4 U.S. Government Revenues and Expenses—Current and Projected under a BIG Plan11 (all figures in billions) FY 2010 REVENUES: Individual Income Tax Corporation Tax Social Security Payroll Taxes Medicare Payroll Taxes Unemployment Insurance Other Retirement Excise Taxes Estate and Gift Taxes Customs Duties Other TOTAL REVENUES EXPENSES: Medicaid Children’s Health Other Education Defense Interest Social Security Medicare Federal Employee Retirement General Retirement Unemployment Compensation Food and Nutrition Assistance Supplemental Security Income Family and Other Support Earned Income Tax Credit Child Tax Credit Making Work Pay Tax Credit Foster Care/Adoption Housing Assistance Other Veterans International Affairs General Science and Space Energy

Proposed Changes

936 157 635 180 51 9 73 17 24 83 $2,165 273 8 88 134 689 188 707 450 120 6 157 88 44 28 55 23 14 7 12 68 108 46 31 10 continued

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Table 13.4 Continued FY 2010 Environment Agriculture Commerce Transportation Community Development Other TOTAL EXPENSES POTENTIAL NEW REVENUES: Eliminate 80% of Tax Loopholes Eliminate Standard Deduction & Personal Exemption Cut Unneeded Welfare Programs Cut Defense Budget from $689 to $295 billion Reverse Bush Tax Cuts of 2001–03 Roll Back Tax Rates to 1994 Level Change All Tax Rates to “Single” Surcharge on High Earners Expand Payroll Tax to All Earnings Stock Transaction Tax of 0.0025 2% Wealth Tax Raise Capital Gains Tax to 35% Raise Estate Tax TOTAL NEW REVENUES COST OF A BIG SURPLUS (DEFICIT)

Proposed Changes

42 7 6 90 23 199 $3,721 $820 300 400 394

($1556)

104 30 60 129 220 100 450 88 7 $3,102 1,889 $ 1,213

Thus, by eliminating 80 percent of tax loopholes, eliminating the standard deduction and personal exemption, cutting some welfare programs, cutting the defense budget to 2000 levels, reversing the Bush tax cuts, rolling back tax rates to 1994 levels, changing all tax rates to “single,” adding a surcharge on the highest incomes, expanding the payroll tax to all incomes, establishing a small stock transaction tax, instituting a 2 percent wealth tax, raising the capital gains tax rate, and increasing the estate tax, we can not only finance a BIG but also come close to eliminating the 2010 deficit of $1,556 billion or the estimated 2011 deficit of $1.267 billion. “Cost is not the problem. The objection is to paying people not to work.” (Senator Russell Long of Louisiana, during the 1970 debate on the Guaranteed Income bill (FAP))

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85. Are There Other Ways to Finance a Basic Income Guarantee? Yes. Some scholars have recommended a 35 percent flat income tax. This could finance a BIG but could not wipe out the estimated 2011 deficit of $1,267 billion. It’s not as favorable to low-income and middle-income folks as is our main proposal. Rep. Jan Schakowsky, a Democrat from Illinois, has proposed a Fairness in Taxation Act (HR 1124). It would tax income over $1 million at a rate of at least 45 percent and income over $1 billion at 50 percent. The bill would also subject the capital gains and dividends that millionaires report, income now taxed at just 15 percent, to the same tax rates that apply to ordinary income. Moshe Adler, professor of economics at Columbia University and author of Economics for the Rest of Us, proposes a graduated scale. The tax rate on $1 million earnings would pay 39.6 percent; the second million, 40.6 percent; and the third; 41.6 percent. A family whose income exceeds $53 million a year would pay the maximum rate of 91 percent on each dollar above this sum—the same rate as what it was during the Eisenhower years (1953–1960). Others have proposed taxing land and natural resources. Henry George’s 1897 seminal book Progress and Poverty sold about 3 million copies and is still in print (www.progress.org). Other suggestions include fees from government-created monopolies (such as the broadcast spectrum and utilities), collective resource ownership, universal stock ownership, and pollution taxes. Another idea is to simply make everyone a part owner of our natural resources, in which case, all people receive a basic income outside of the government tax system. This is the idea behind the Alaska Permanent Fund (see chapter 20), one of the most popular government programs in the country. People do not view the fund as a handout but as the reward of ownership.

86. It Sounds Too Easy. What Am I Missing? Naturally, this chapter is only a guideline as to how a full BIG might be financed. There are hundreds of possible variables. Most of the 173 tax loopholes have powerful constituencies that may not take kindly to losing their windfalls. The tax laws are deliberately complex so that everyone has plenty of deductions or “loopholes.” Many of us have our own special loophole. We don’t like to

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call it a loophole when it’s our loophole. We call it a legitimate tax deduction. Someone else has the loophole. Whatever we call it, taxes avoided by one group of taxpayers must be made up by others. This is a crucial point too often overlooked. There is a blissful tendency to regard the IRS as some alien entity, and to ignore the harsh fact that when someone else pays less, the rest of us pay more. One particularly egregious loophole is called the “Step up basis of capital gains at death.” Say what? Here’s how it works: if Charlie bought a stock, years ago, for $10,000 and it’s now worth $30,000, he has a $20,000 profit. If he sells it, he pays a 15 percent capital gains tax of $3,000. But if Charlie dies and leaves the stock to his ne’er-do-well offspring, they pay no tax whatsoever. Zero. Charlie’s cost basis has been “stepped up” to the value of the stock today. This choice loophole cost other taxpayers $40 billion in 2010.12 The federal income tax deduction for mortgage interest will cost the U.S. treasury $92 billion in 2010. But most of the benefits from the deduction go to the affluent. Millionaires even deduct the mortgage on their yachts. How’s that? Current law extends the mortgage interest deduction to second homes, and the wealthy can label a yacht a second home if they live on it at least two weeks a year.13 Canada and the UK manage to have a stable housing market and high homeownership rates without a mortgage interest deduction.14 Tax breaks for employer-sponsored health insurance cost $160 billion a year.15 On the other hand, some of those tax breaks have worthwhile purposes and, perhaps, should be retained, even under our BIG plan. “Cutting tax expenditures is really the best way to ernment spending.” Martin Feldstein, Chairman of of Economic Advisers under President Reagan; Expenditure’ Solution for Our National Debt,” Journal, July 20, 2010

reduce govthe Council “The ‘Tax Wall Street

While one goal of BIG is to replace the hodgepodge of paternalistic and inadequate welfare programs that have sprung up over the years, perhaps some should be left in place. The 2010 tax expenditures and government program figures are hopefully dead on. But some of our figures are best estimates, such as the revenues to be gained by dropping the personal exemption, instituting a wealth tax, or reversing the Bush tax cuts. Moreover, if all 173 tax expenditures were changed

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simultaneously, the grand total could be different because of potential interactions among items. Yet another variable is: how long should people live in the United States before becoming eligible for a BIG? A year, as in the Alaska Permanent Fund? Ten years? Based on models in Australia and other countries, we arbitrarily chose five years. We did not touch the huge health care costs in the current federal budget. Needless to say, the United States should adopt a national, single-payer health plan—“Medicare for All”—as all other Western nations have done. Some experts argue that the costs of such a plan would actually save money from the current U.S. health care system, but those figures and that debate are beyond the scope of this book. Again, there are hundreds of possible variations. But the main purpose of this chapter is to show that it is not impossible to provide a full BIG to all Americans. Adopting a Basic Income Guarantee also saves money in many other ways. The social costs of allowing poverty to exist are enormous. It costs more to care for the physically stunted and mentally damaged victims of poverty than it would cost to feed them as babies. It costs more to build prisons than it would cost to feed povertystricken, no-hope children early in their lives. In California, it costs $45,000 to house one prisoner for a year. So we can pay now, or pay later. In the United States and in the richest industrial nations, productivity, wealth, and national incomes have grown sufficiently to support an adequate BIG. A BIG is not just a cost. It’s an investment in society. Programs that provide basic life supports, help develop skills, and bring hope are indispensable in a civilized society. Providing a basic income to everyone is not “throwing money at a problem.” It is investing in success. A BIG would virtually end hunger and poverty in America and provide economic freedom and security to everyone. “We’re going to close the unproductive tax loopholes that allowed some of the truly wealthy to avoid paying their fair share. In theory, some of those loopholes were understandable, but in practice they sometimes made it possible for millionaires to pay nothing, while a bus driver was paying 10 percent of his salary. And that’s crazy.” (President Ronald Reagan, Presidential news conference on national television, 1985. Cited by columnist Bill Press, The Hill, Washington, DC, October 14, 2011)

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CH A P T ER

14

Will a Basic Income Guarantee Work?

If man is inherently irresponsible and a bum, the Guaranteed Income is undoubtedly the most stupid idea that anybody has yet managed to come up with. If, on the other hand, you believe in the long run that human beings can become responsible, can rise to the responsibility of developing themselves in our society, then the Guaranteed Income is the only thing, in my opinion, which will begin to lead us into a free society. —Robert Theobald, The Guaranteed Income (Garden City, NY: Doubleday & Co., 1966)

87. What Kind of Basic Income Program Do We Need? One that meets the following principles: 1. 2. 3. 4. 5.

Be available as a matter of right. Be enough to provide food, shelter, and basic necessities. Provide positive incentives to work. Be administered simply, by the federal government. Allow for adjustments in benefits according to changes in the cost of living. 6. Protect individual rights, dignity, and family life. 7. Be developed so as to respect the freedom of each of us to manage our own life, increase our power to choose our own career, and enable us to participate in meeting personal and community needs.

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88. Won’t There Be a Lot of Cheating Under a Basic Income Guarantee? The same question was asked in 1916 during the debate on the federal income tax. The answer is the same. The income tax, with its obvious flaws, works. We’ll eliminate most cheating by simply making it a federal crime to falsely report information. Spot checks will be made. Cheaters will go to jail. The system will be computerized. Checks will be deposited into authorized bank accounts, just like the Social Security system.

89. Under a Basic Income Guarantee, if I Didn’t Want to Work, Would I Have to? You wouldn’t have to work in the sense that you’d starve if you didn’t. Just as today you don’t have to do anything in order to breathe, so you wouldn’t have to do anything in order to eat and stay alive. The principle is that each man, woman, and child has the right to live. It’s a universal right. Everyone has a moral right to the minimum physical conditions of life—air, water, food, and shelter—simply because he or she is here. A minimum basic income would be guaranteed as a legal right— an economic equivalent to the right of freedom of speech and religious liberty. The minimum income would be granted regardless of whether you are willing to work to earn it. It would represent an economic floor under which no one would have to fall. “Psychiatrists are busiest when unemployment is up. People don’t know what to do with themselves. They’re confused. They want help. It’s a busy time.” (Dr. Manuel J. Smith, When I Say No, I Feel Guilty, February 1, 1975 (Bantam, 4th ed., January 1, 1985))

90. You’re Crazy. Why Would Anyone Work if Their Income Was Guaranteed? First, to earn more than a bare subsistence living. The basic income guarantee would be set at a minimum level—enough for food, shelter,

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and basic necessities. If people chose not to work, they would also be choosing not to escape poverty. Second, tests show that people want to work. We need work to feel useful to ourselves and society. We thrive on work. We want to be busy. We want to spend our life in a meaningful way. Most millionaires who don’t have to work nevertheless spend their time working or in some meaningful way. The lives of lottery winners remain much the same as before they hit the jackpot. In 1984, a study of 576 lottery winners in the United States was conducted by Dr. Roy Kaplan of the Florida Institute for Technology. The winners received amounts ranging from $50,000 to $2 million, to be paid over 20 years. The study showed no significant behavioral changes for the huge majority of winners. “Only 11 percent (49) of the winners quit their jobs during the first year after winning, out of a total of 446 winners who were employed at the time they won,” Kaplan concluded. Of winners who received less than $10,000 a year, only 5 percent quit their jobs. Most who left their jobs did so to spend more time with their children; 44 went back to school to further their education; 59 made career changes. We all have to take a break once in a while. We all need a vacation. But to spend our lives that way is boring. Retirement for many has been lonely and empty. But others have found it possible for retirement to really enrich their lives. For them, it’s opened up new horizons of creativity, service, and freedom. To do volunteer work; to travel; to read, write, and create. Think about it. Would you quit your job? Would you choose to live on less than $1,000 per month? Why, when you can have that added to your current income? Won’t you still want to work and earn more? And what is work? Just a job? Or anything that’s productive? Is a volunteer at a hospital less productive than the same person on an assembly line? Is a mother caring for her children at home less productive than if she were flipping burgers at McDonald’s? Is a man who paints a portrait of the sea for his own pleasure goofing off, but working if he sells the painting to someone else for money? Yes, there will be goof-offs. Who cares? But, if they want anything extra, they will have to do some additional part-time work. And, if they want the real good life, they will have to have successful careers as they do now. “In general, man rises to meet a challenge and does not have to be coerced into action by a fear of financial or social deprivation.

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This is no naïve idealism; it is simply a recognition that a society can be organized so that most men will desire responsibility and accept it willingly. Men can benefit from the freedom that a Guaranteed Annual Income allows. Individuals can come to see a Guaranteed Income as a right, and that, in exchange, they will accept the obligation of developing themselves and their society.” (Robert Theobald, The Guaranteed Income (Garden City, NY: Doubleday & Co., 1966))

91. But Doesn’t Work Give Us Our Self-Identity? Work isn’t just what we get paid for doing. It should include all meaningful activity. Why must we always be doing something to prove our worth as human beings? Shouldn’t the basic conditions of human existence be secured before we talk about earning or deserving a living? The whole point of economics is to provide the material things we need to live a fulfilling life. Not the other way around. “Our national objective,” said economist Milton Friedman, “should be to have the fewest possible jobs, that is to say, the least amount of work for the greatest amount of product.”1 The real striving in America today comes not from the poor, but from those already inside the system, working to advance themselves socially and financially. When Social Security was proposed, opponents said it would ruin our national thriftiness and responsibility. People, they said, should save their money for their old age. This was a comforting thought when most Americans lived on farms and children were profit-earning assets. But in the city, children can’t be economically productive. Their education takes 16 to 21 years. Then they have their own children to raise and educate. Only the top 5 percent of American wage earners can put away enough savings to provide for their old age. When unemployment insurance was started in Europe before World War I, to keep families going during temporary layoffs, it was ridiculed in the United States as a free handout to shiftless freeloaders; as a reward for being lazy. Why would a person ever go back to work? Thirty years and a crippling depression later, the United States adopted it for a handful of workers. Those workers and their

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families later became some of the most stable and productive in the nation. One of our most successful social programs was the GI Bill. After World War II, we gave millions of dollars in free college education to returning servicemen in gratitude for what they had done during the war. It turned out to be one of the best investments we ever made. Not only did those veterans develop themselves personally, they made lasting contributions to all of us. “To be without function, without use to our fellow citizens, is to simply not be seen.” (John Adams, The Works of John Adams, Second President of the United States (Cambridge Library Collection— History, Volume 1, first published in 1850–1856))

92. C’mon. I Can Find Plenty to Do All Day without Working. Go to the Beach. Play Golf. Go to the Track. Read. Play with the Kids . . . Sure you would. But for how long? We all have to take a break once in a while. We all need a vacation. We could all use three or four days to just lie on the beach and do nothing. But to spend your life that way is boring, deadening. Retirement for many has been lonely, empty; a meaningless burden. But others have found it possible for retirement to really enrich their lives. For them, it’s opened up new horizons of creativity, service, and freedom: to do volunteer work, travel, read, write, and create. Meaningful activity isn’t limited to just a traditional type of job. “After a while, golf is boring.” (Johnny Carson, talking on national nighttime television with Ed McMahon, NBC, 1981)

93. But Isn’t Money the Only Reason People Work? Most of us think of work in terms of monotonous, alienated, repetitious nine-to-five jobs; as regimentation. We’re a small cog in a giant wheel. Some think that’s the only kind of work available. We assume

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that aversion to work is natural. That money, prestige, and power are the only incentives to work. But it doesn’t have to be like that. We all want to spend our energies on something worthwhile. Money isn’t the only incentive to work. There’s pride. There’s social recognition. There’s pleasure in the work itself. Think of scientists, artists, musicians, lawyers, social workers, businessmen, engineers, and laborers. They’re not motivated only by money, but by interest in the work they’re doing, by pride in their achievements, by recognition, and by the wish for fame. Think of the efforts of dedicated volunteer workers in hospitals, youth groups, and hundreds of other activities. A Los Angeles Times poll showed that having an “interesting job” is rated as the most important factor in achieving job satisfaction. Next in importance is a sense of accomplishment on the job. Third is having work that gives some prestige. Money is only in fourth place as a means of achieving satisfaction.2 A basic income guarantee can liberate us from some of the routines of labor so that our activity can be more creative and free. “If there is any secret to staying younger longer, or prolonging life, the secret is work. Man must use his organs if he wants to stay healthy and active.” (Dr. Heinz Wolterek, A New Life in Later Years (Dial Press))

94. People Are Lazy. They Don’t Want to Work. This is another of the myths that many sincere Americans believe. Laziness isn’t normal. One of the worst forms of mental suffering is boredom; not knowing what to do with oneself and one’s time. Look at children. They’re never lazy. They’re busy playing, asking questions, and inventing stories, with no incentive except the pleasure in the activity itself. Look at workers. During periods of unemployment, many of us suffer as much from the enforced “rest” as we do from the lack of a paycheck. Most of us work as employees. That doesn’t offer us much chance to develop our talents or to show any outstanding achievements. Managers and professionals have some interest in achieving personal goals. But most of us sell our physical labor to an employer, who uses it to make a profit. Usually we have no share in this profit. We have no interest. Our only purpose is to make a living; to satisfy our consumer appetite.

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Boredom, apathy, dissatisfaction, a sense of futility and a vague feeling that life is meaningless are the unavoidable results of this situation. If you had a basic income guarantee, would you hole up, get drunk, and make love? Go to the beach and surf? Travel? Maybe. At least for a while. But not everyone would do that all the time. Chances are that you’d soon want to get to work doing something. What? Up to you. Productive? Maybe. Today, too many jobs cause tension and hostility. They lead to a dislike of our work and everything connected with it. So we find a longing for laziness and for “doing nothing” to be the ideal of many people. People feel their laziness is the “natural” state of mind, rather than the symptom of a pathological condition of life, the result of meaningless and alienated work. We know that our behavior is determined by unsatisfied needs that we want to satisfy. These needs form a value hierarchy:3 1. 2. 3. 4. 5.

Body (I can’t breathe) Safety (How can I protect myself from . . . ?) Social (I want to be loved and belong) Ego (Gee, I’m terrific, aren’t I?) Development (I’m better than I was last year)

We are totally motivated by each level of need in order, until that level is satisfied. If we haven’t slept in three days, we’re totally motivated by a need for sleep. The only time we think of air is when we’re deprived of it. We don’t naively believe that human beings are perfect. We know that a small percentage of us—the poor as well as the rich—are happy doing nothing. But the evidence shows that most of us want jobs, not just for the sake of more money but because we find idleness boring. “Laziness is not normal. It is a symptom of mental pathology. Even if man had no monetary or any other reward, he would be eager to spend his energy in some meaningful way because he could not stand the boredom which inactivity produces. In the field of psycho-pathology we find that the person who has no interest in doing anything is seriously sick and is far from exhibiting the normal state of human nature.” (Erich Fromm, The Sane Society (Holt, Rinehart & Winston, 1955))

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95. It Won’t Work. People Are Savages, Selfish, Dishonest, and Greedy. Are they? History shows that hundreds—perhaps thousands—of peoples and tribes have formed societies without violence, hostility, greed, selfishness, and the other vices that we usually think of as normal for human beings. The Hopi Indians were one. The natives of Tahiti—until visited by the white man—were another. Hundreds of community-minded groups have split themselves off from mainstream society to form a cooperative, helpful, caring, loving society. The early Christians, the Amish, the Quakers, the Oneida Society are just a few that come to mind. The dark side of human nature is a subject of a millennium of debate. Does it exist at conception? If so, can it be taught away? Is it present in every human being? Or does it have to be drummed into an otherwise inherently good individual? It is said that human beings will believe anything if you tell them long enough and loud enough. Witness Nazi Germany. Witness, also, the peace-loving peoples of centuries of civilization. If you’re born in Ireland, you’re Catholic. If you’re born in Iran, you’re Muslim. Goodness, decency, and compassion can be taught. So can fear, hatred, and greed. Countless animal communities live in peace with each other. Humans are one of the few species that kill its own kind. “In spite of everything, I still believe that people are really good at heart.” (Anne Frank, The Diary of Anne Frank (Contact Publishing, 1947; published in English, 1952)) “You’ve got to be taught to hate and fear.” (Oscar Hammerstein II, You’ve Got to Be Taught , from South Pacific, first produced on Broadway, 1949)

96. You’ll Wind up with Two Classes of People: Those Who Work and Those Who Don’t. It’ll Create Class Conflict. That’s what we’ve got now. A family on welfare is completely controlled by the government. It scratches out a living from day to day. It

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lives in uncertainty. It can’t plan for the future. It’s separated from the middle-class family not only in income but also in attitudes toward life. It can’t hope for the security and regularity of life that the middle classes cherish. Under a basic income guarantee, people will have more freedom to seek training so they can keep up with the changing job market. “I suppose what shook me the most about China was that it completely altered my notions about human nature. I used to believe human nature was absolute . . . If someone stole, cheated, murdered, or was outrageously greedy, I would often dismiss the behavior as par for the course. I had plenty of evidence for the proposition that man was basically selfish, aggressive, fearful, savage, and greedy. But I couldn’t feel that way anymore. I had seen an entire nation, once degraded, corrupt, demoralized, and exploited, that was changing its very nature. In changing the political, economic, and material nature, they had caused the better side of human nature to dominate. I realized that if what we call human nature can be changed, then absolutely anything is possible. And from that moment, my life changed.” (Shirley Maclaine, You Can Get There from Here (New York: W.W. Norton & Co, 1975))

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CH A P T ER

1 5

Has the Basic Income Guarantee Ever Been Tested?

Cash assistance programs would not cause a massive withdrawal of workers from the labor force, as many have feared. When combined with jobs, they would result in increased work effort. Any reduction in work effort caused by cash assistance would be more than offset by the increased employment opportunities provided in public service jobs. —Conclusion of Seattle-Denver Negative Income Tax Experiment, February 1978, page xv, Dept. of Health, Education and Welfare

97. Has the Basic Income Guarantee Ever Been Tested? Yes. One of the most significant outcomes of the guaranteed income movement of the 1960s and 1970s was the federal government’s decision to conduct four experiments to see how the idea would work in practice. Known collectively as the NIT (Negative Income Tax) experiments, they were the first large-scale social science experiments ever conducted, and they have been a model for social science research ever since.1 The researchers who conducted the experiments were aware that unconditional income support would cause people to work less than they otherwise would, but how much less? Would it be so much that the program would become unaffordable or unsustainable? What would be the effects on the overall well-being of recipients? From 1968 to 1979, four separate Negative Income experiments were undertaken in different parts of the country.

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The experiments randomly assigned participants into a “treatment group” and a “control group,” just as medical researchers do when testing new drugs. Members of the treatment group were made eligible for NIT of varying sizes. Members of the control group continued under the existing welfare rules of their state, although they were compensated slightly for regularly answering the questions of researchers. Then the researchers compared the behavior of the two groups. The results showed that men in the test group worked 6 percent less hours than the men in the control group. Women with children worked from 7 to 21 percent less. Overall, the decline in work effort for all four experiments averaged 9 percent. The results were surprisingly consistent. One of the four tests showed test-group husbands worked 7 percent fewer hours than control-group husbands. Two tests showed they worked 6 percent less. The fourth test showed only 1 percent less. The four experiments were held in the following places: 1. Urban areas in New Jersey and Pennsylvania from 1968 to 1972 (1,216 families). 2. Rural areas in Iowa and North Carolina from 1969 to 1973 (809 families). 3. Gary, Indiana, from 1971 to 1974 (1,799 families). 4. Seattle and Denver from 1970 to 1978 (4,879 families). In the four experiments, different minimum income levels were tested. Some families received a minimum of 100 percent of the poverty level. Some received 75 percent. Some received only 50 percent. And different “benefit reduction rates” or “tax rates” were tested. Some families’ benefits were reduced by 50 cents for each dollar earned. Some were reduced 70 cents. The Seattle-Denver test found: Under various alternative cash assistance programs that contained no work requirement and were not combined with any provision of job search assistance, training, or public service employment, husbands in the experimental group worked only slightly less—6 percent fewer hours—than husbands in the control group. For wives and female family heads, the percentage decline in work effort was greater—17 percent and 12 percent, respectively— as compared with the relevant control group. But since most wives

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in low-income families and female family heads work relatively few hours, the absolute decline in their hours of work was small. These declines in hours of paid work were undoubtedly compensated in part by other useful activities, such as search for better jobs or work in the home.2

Estimated reduction in work hours, by test group compared to control group, in the four NIT experiments are given below.

Husbands Wives Total Female heads

NJ-PA

IA-NC

GARY

SEA-DEN

6% 31% 13% ⫺

1% 27% 8% ⫺

7% 17% 9% 2%

6% 17% 12%

One researcher remarked: “In no case is there evidence of a massive withdrawal from the labor force.”3 In the case of husbands, the reduced work effort of the treatment group was explained mostly by their taking more time to look for their next jobs if they became unemployed. In the case of women with children, it was explained also by their working fewer hours each week. But none of the researchers found evidence of people who simply stopped working or looking for work so that they could live off the NIT.4 Despite the positive results, their publication was a public relations disaster. Editorials and speeches at the time indicated that the authors believed that any size of work effort reduction was too much. Many misinterpreted a 5 percent work effort reduction to mean that 5 percent of the population would stop working, when, in fact, researchers could not find any evidence of people who simply stopped working. Some commentators were even incredulous why the government would run an experiment to find out whether people would work less if they were paid not to work, seemingly unaware that the question was not whether but how much.5 At least one former champion of the idea, Senator Daniel Moynihan, lost enthusiasm for the idea when the results came in. Although the NIT experiments had a negative effect on public perception of basic income guarantee (BIG), when looked at closely, their results provide strong reason to believe the policy is beneficial and affordable.6

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There are many ways to cut work hours. Over a period of time, you can cut by taking longer to look for a job. By taking more leave without pay. By turning down overtime work when offered. We find the most common way is on job turnover. People just take longer to get re-employed. I don’t think there were a lot of people who were full-time workers who just quit work altogether and went on relief. I’m not sure anybody did that. But by stretching out the periods in which you don’t work, you cut your income somewhat, and substitute some leisure and some income maintenance. That’s the kind of trade-off that all people make. You don’t work as many hours as you physically could. You take some leisure. (Robert Spiegelman, Project Director, Seattle-Denver Income Maintenance Experiment, History and Design, Final Report of the SIME-DIME Experiment , Vol. 1, SRI International, Menlo Park, CA, 1–51, 1983)

98. Why Did One NIT Test Cause More Marriages to Break Up? It’s hard to say. Probably because it had a liberating effect on women who might otherwise have remained in unpleasant marriages for financial reasons. This aspect of the test surprised a lot of people. Extra income is supposed to solidify a family, not break it up. But a basic income guarantee provides independence. To both women and men. Perhaps it gives the freedom to leave an unhappy marriage. The Seattle-Denver test showed 50 percent more families broke up in the test group than in the control group. The other three tests didn’t show this kind of breakup. Possibly because the overall divorce rate in the Seattle and Denver areas is above the national average. While more white and black families broke up, Hispanics didn’t. No one challenged the statistical analyses. They were first rate. But economist Henry Aaron said the results were “puzzling” and contained some “statistical anomalies.” But suppose the Seattle-Denver findings are right? Does that mean we should scrap the idea of a basic income guarantee? Many who were previously on the brink said yes. But should the government make welfare policy on the basis of the divorce rate? If a person chooses to leave a bad marriage, which was held together only by poverty, shouldn’t that be their right? Should disastrous marriages be preserved simply because neither partner can afford to live alone? Should children starve simply because help might cause their parents to behave differently?

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Should we drop the concept of a BIG because it might cause a rise in divorce? Should we do this any more than give a cash bonus to people who stay together? “This system of income has given us so much more than money. It has given us freedom. My wife and I both started reading and studying things like interest and budgeting. This has left us not only with a good family budget, but also a concern with each other’s problems.” (30-year-old Denver father)

99. What about the Failure of the “Speenhamland System?” Around the end of the eighteenth century, Great Britain set up a guaranteed income plan to help the needy, called the “Speenhamland System.” One view says the system had been set up with the best of intent, but with disastrous results. “It drained the productive capacity of the masses, destroyed their independence, and shattered their selfrespect,” said Britisher Karl Polanyi in The Great Transformation. But American historians reject Polanyi’s analysis. Speenhamland was no great success, but no great failure either. Unemployment, poverty, and productivity were no greater in the 18 Speenhamland counties than in those outside the system. One analysis reported: “Far from having an inhibitory effect, it probably contributed to economic expansion.” The big problem with Speenhamland was that it imposed a 100 percent tax on earnings up to the poverty line. The local community made up the difference between a man’s income and his family’s needs. Below the poverty level, each extra shilling of income meant a shilling less in his allowance from the poor rates. Thus, there was absolutely no financial incentive to work. As we’ve seen, money isn’t the only reason people work. But it is one of the reasons. A basic income guarantee would be set up so that an extra dollar earned always means more money available for spending.

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CH A P T ER

16

What about the Work Ethic?

People don’t hate work. It’s as natural as rest or play. They don’t have to be forced or threatened. If they commit themselves to mutual objectives, they’ll drive themselves more effectively than you can drive them. —Robert Townsend, former President of Avis Corp., Up the Organization, 1970, reprint (Greenwich, CT: Fawcett Publications, Inc., December 12, 1981)

100. What about the Work Ethic? This is where the emotion is. It’s “workfare” versus “welfare.” “Emptying bed pans” versus “living the good life.” Logic won’t work. We believe what we want to believe. The work ethic says that work is necessary and good. All of us should carry our fair share of the load. Fair enough. But what is work? Just a job? Or anything that’s productive? A narrow definition of work says it’s only a “job” that produces economic gain. A broad definition of work sees it as any human activity directed toward the achievement of objectives. Webster defines work as to “put forth effort, strive, act, labor, toil, accomplish.” All creative exertion can be called work.1 Our society tends to view work in narrow terms, as labor to produce goods and services that can be sold. A housewife, for example. Once a week, she helps out at the hospital. It’s voluntary. She doesn’t get paid a dime. Is she “working?” Or not? According to the broad definition, it is work. It’s a human activity directed toward the achievement of an objective. But according to the narrow definition, it isn’t work, because she doesn’t get paid.

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And what is leisure? The narrow definition of leisure can be defined as idleness, or goofing off. The broad definition of leisure sees it as active, perhaps creative, use of free time. Thus, when work is defined broadly and leisure is defined broadly, they can amount to the same thing. Some examples: Is a mother at home caring for her children performing less work than if she were operating a computer in an office? Is a volunteer worker at the YMCA or with a youth group less productive than the same person on an assembly line in Detroit? Many things we do are productive. Not just jobs we get paid for. But our official national statistics don’t recognize this. For example, housework isn’t “work” unless it’s performed by a hired domestic. When a man marries his housekeeper, the Gross Domestic Product goes down. Work isn’t just what we get paid for doing. It should include all meaningful activity. And just why must we always be doing something to prove our worth as human beings? Shouldn’t the basic conditions of human existence be secured before we talk about earning or deserving a living? The whole point of economics is to provide the material things we need to live a fulfilling life. Not the other way around. When our integrity and our social relationships are used mainly to produce more goods, then economics destroys rather than fulfills our purpose in living. “Today, with sophisticated machines—computers, microprocessors—we can liberate man from the harshness of work. We can begin to produce more, produce better and, at the same time, give man a chance to live, to use more intelligently the moments when he doesn’t work, to have a little learning and some culture.” (François Mitterrand, President of France, Campaign speech, 1981)

101. Why Should Productive People Contribute to Nonproductive People? Perhaps because we’re a compassionate people. Because we know it’s right. This is really an old question. It’s the usual approach of opponents to all social change. It was used in virtually all nations against

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the adoption of pensions, unemployment insurance, free health care—even against free public education. Today, we give subsidies to the rich—to farmers, auto makers, utilities, banks, airlines, and oil companies. Why not give a little to the rest of us? Getting paid for not working is nothing new. Consider inheritance and property income. If a wealthy relative leaves me $1 million that I invest in tax-free municipal bonds, I can lie on the beach and still make a nice living. Or, if I invest money in a stock and it goes up, I can manage a nice profit without lifting a finger. People who live past age 77, according to some estimates, received money from the government over and above what they paid into Social Security during their working years. Should we refuse to care for our children or for our aged because they are “nonproductive?” We pass legislation to underwrite the ventures of billionaire oil men. We bail out Lockheed, GM, Chrysler, and AIG. Surely we can take steps to give our own people a chance. “The man who can produce twice as much as another with the same effort, instead of being rewarded for doing so, ought to be punished for not doing so. Do you reward a horse because he can pull a heavier load than a goat? Would anyone dream of refusing to feed a baby simply because he was not making a productive contribution?” (Edward Bellamy, Looking Backward , 1888)

102. If People Get a Check from the Government Each Month, Won’t That Create a Sense of Entitlement and Dependency? It’s often said that Americans are naturally independent, and should be, and that dependency is bad, a sign of weakness. But no one is truly independent. For better or worse, we need one another. We are mutually interdependent. Courts have repeatedly ruled that government must provide decent food and shelter to convicted felons in prison and to enemy prisoners of war. If people who have acted against the interests of society are so entitled, aren’t we all? Experts who worry about “dependency” are usually thinking of means-tested welfare programs. A “means test” is an income test. People are typically eligible for means-tested grants only if their income is below a certain level. If a person will lose a grant if he or

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she earns more money, then that person is likely to be discouraged from looking for work. Or persons may try to hide the fact that they are earning other income. Basic income guarantee (BIG), on the other hand, has no means test, so no one will be penalized for working or trying to earn more. Severe poverty is a much more dangerous type of dependency. Evidence suggests that BIG would be more like a springboard, providing the “lift” to let people reach for better lives.

103. How Can You Prevent People from Wasting the Grant on Alcohol, Lottery Tickets, and so on? You can’t. Just as you cannot prevent people who currently receive old age pensions, child support grants, and disability grants from doing this. But the overwhelming majority of people use their resources responsibly. With any large national program, there will inevitably be a small number of irresponsible people who abuse the system. But these people should not become an excuse for withholding a BIG from responsible people.

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CH A P T ER

17

What Will Life Be Like under a Basic Income Guarantee?

What we want are not jobs; we want productive jobs. We want jobs that will enable us to produce goods and services we consume at a minimum expenditure of effort. In a way, the appropriate national objective is to have the fewest possible jobs, that is to say, the least amount of work for the greatest amount of product. —Milton Friedman, Capitalism and Freedom (Chicago, IL: Chicago University Press, 1962)

104. If We Adopt a Basic Income Guarantee, Will There Be More Unemployment than There Is Now? Maybe, but if there is, we’ll regard that as good, not bad. Today we try to provide jobs for everyone. But that’s not realistic anymore. There are more people than jobs. So we must guarantee everyone a minimum income. Maybe this will mean more unemployment. But that’s okay. Today we’re afraid of being out of work because: 1. It means the end of our paycheck. 2. It means we’ll have nothing worthwhile to do. A basic income guarantee will take care of #1. Then we set up new ways for us to do worthwhile things. To develop our full potential. Whether in the usual type of “job.” Or in something completely different. But still worthwhile.

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A basic income guarantee will provide each of us with the freedom to develop ourselves and our community. “I have a principle that the more complicated your job, then the more learning you get out of it and you ought to start having to pay a tuition. Bank presidents, college chancellors, superintendents and governors, let’s charge them a tuition for the privilege of having such interesting jobs . . . and give a raise to the people who work on dull, routine jobs.” (California Governor Jerry Brown, News Conference, 1st term, September, 1975)

105. What about Menial and Monotonous Jobs; Jobs with Low Prestige? Who Will Do These Jobs? The fact that our society forces alleged “menial” jobs on people, under the threat of starvation if they don’t perform the jobs, says something about the way we live. Yet, although it’s widely believed that some jobs are so menial that only illegal aliens will take them, 75 percent of unemployed workers said they would apply for jobs paying the minimum wage.1 There are four ways of solving the problem of “menial” and “monotonous” jobs, such as janitor, garbage man, assembly line work, and so on: 1. Let technology take over as many of these jobs as possible. 2. Pay more money for doing “dirty jobs.” 3. Change our attitude. “Menial” and “monotonous” are mainly states of mind. In our status-oriented society, an executive or lawyer has more prestige than, say, a taxi driver. But why? Each performs a service for society. If we change our attitude, jobs that are now considered menial won’t be. All jobs will be considered worthwhile contributions to the betterment of the community. 4. Create a work situation so we can give our life and energy to something that has meaning for us; to something that has importance; to something in which we feel united with, rather than separated from, each other. The work situation can organize workers into small enough groups to enable us to relate to the group as real, concrete human beings, even though the organization as a whole may have thousands of workers. One way to create this situation is to simply copy the Europeans. The workers in each plant and industry can elect committees. The

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committees oversee production. They participate in decisions about work speed, automation, hiring and firing, promotions, and health and safety standards. In Europe, workers and management share information on corporate data and finances. They jointly make decisions on whether to buy or sell a product, where to purchase raw materials, what price to sell the product at, and a host of other matters. Efficiency in production can be combined with individual selfrealization. Since workers spend such a large part of their lives on the job, they have an interest in seeing to it that the enterprise is run in a sensible manner. The primary purpose of any work should be to serve people, not make a profit.

106. Will There Be Less Crime and Violence under a BIG? Yes. People will not have to resort to stealing to feed their families. More volunteers will be available to help the police and the courts. People will no longer feel the rage that they often do now against the “1 percent” and against the unfairness of the system. Just like one night in November 2011 when, for no apparent reason, vandals broke the windows of 20 businesses in Sherman Oaks, Calif. In the small BIG pilot programs that have been conducted in various places around the world, most, if not all, have reported a drop in crime and violence (see chapter 20). Picture a criminal. Most people immediately cue up some stereotype: a young black or Latino man from an inner-city neighborhood where unemployment is high, gangs are active, guns and drugs are easy to get, and there’s plenty of money in the hands of thugs, pimps, and drug dealers. Now imagine the same young man with BIG in effect. If he’s not yet 18, he looks forward to receiving BIG. If he’s over 18, he has some income for food and shelter, guaranteed, as long as he obeys the law. In other words, the young man and his environment are very different than today. (Steven Shafarman, Peaceful, Positive Revolution (Denver, CO: Tendril Press, 2008))

107. How Can We Trust People to Find Socially Useful Work on Their Own? The government and private industry should lead the way by creating socially useful jobs in peacetime projects.

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There is a long shopping list of unmet public needs. We need more occupational health and safety inspectors, prisons that rehabilitate instead of just regurgitate criminals, more drug treatment and enforcement personnel, recreational supervisors, teachers, paramedics, nurses’ aids, legal aid, and public transportation workers. The backlog is endless. People can be trained to fit into these slots. Many other individuals are perfectly capable of determining what has to be done to develop themselves and the community. They would act accordingly if they had the funds that would free them from the necessity of holding a traditional-type job. A comparison is made to the ownership of capital. It’s claimed the possession of capital hasn’t led to a decline in individual and social responsibility. So, therefore, there’s no reason why a basic income should lead to a decline in individual and social responsibility. A basic income guarantee involves a major shift in rights and responsibilities. Today we’re expected to find a job; then we’re provided with the right to “pursue happiness.” Tomorrow, we’ll be granted the right to live with an adequate income; then we’ll be motivated to develop ourselves and our society. The guaranteed income proposal is based on the fundamental American belief in the right and the ability of the individual to decide what he wishes and ought to do. This is surely the basic meaning of the phrase “private enterprise,” that the individual should have the right to obtain enough resources to do what he believes to be important. In the past, the individual could go into business for himself and thus obtain resources. Today all the evidence shows that neither the self-employed businessman nor the small company can compete with the large corporation. The ideal of private enterprise can, therefore, be reserved only if the guaranteed income is introduced. (Robert Theobald, The Guaranteed Income (Garden City, NY: Doubleday & Co., 1966))

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CH A P T ER

18

Will a Basic Income Guarantee Threaten Democracy?

We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. Necessitous men are not free men. People who are hungry and out of a job are the stuff of which dictatorships are made. —President Franklin D. Roosevelt, State of the Union Address, January 11, 1944

108. Isn’t a Basic Minimum Income Alien to the American Way of Life? No. The Declaration of Independence affirms the right to “life,” as well as to “liberty and the pursuit of happiness.” The idea of giving money to people for not working threatens something dear to Americans: the persistent notion that each person, armed with hoe and axe, is still master of his or her own livelihood. But the notion overlooks the tragic reality that a family in the city collapses without a certain level of income. We still have the widespread attitude in America that there’s something wrong with giving food to people. It’s a real hang-up. It’s the old puritan ethic that if you feed people, they won’t work. How often have you heard that? The truth is that we’ve got to feed people before they’re able to work. People can’t work if they can’t eat. When we give $40,000 to a farmer for not growing wheat, for not producing, for not “working,” we don’t look down on him or feel it’s shameful. The subsidy serves a purpose. It doesn’t ruin the farmer’s will to work. It doesn’t diminish his patriotism as an American. He’s a great fellow. But if we give a little kid a 40-cent breakfast,

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we’ve ruined his character. We’ve destroyed him as an American. It doesn’t make sense. (Former U.S. Senator Ernest Hollings of South Carolina, Speech on Senate floor, October, 1979)

109. Would a Basic Income Guarantee Threaten Democracy? No. It may be the only thing that will save it. Meaningful participation in a democracy requires a certain amount of money. You need a firm economic footing before you can act responsibly. If you’re broke, how much does democracy mean to you? If you’re hungry, you’re not free. Each of us can act as a free person only if one of the main reasons for our present unfreedom is abolished—the economic threat of starvation that forces us to accept working conditions that we would otherwise not accept. There will be no real freedom as long as the owners of capital can enforce their will on the people who own “only” their life. One-hundred years ago, most everyone accepted the idea that no one had the responsibility for his neighbor, Christianity notwithstanding. It was assumed, and even scientifically “proved” by economists, that the laws of nature made it necessary to have a huge army of poor in order to keep the economy going. Today we know better. Yet, if we dislike our job, we’re generally forced to continue in it because we can’t afford to risk unemployment even for one or two months. If we quit, we may have no legal right to unemployment insurance. If we get fired, benefits are usually inadequate, short-lived, or nonexistent. Take the case of a man who, at the age of 40, decides that he wants an entirely different kind of job, for which it will take a year or two to prepare himself. Or take a woman in an unhappy marriage, whose only reason for not leaving is the inability to support herself while she gets trained for a new job. Under our present structure, it’s tough to make the change. With a basic income, we’d have a better shot at a second career. Today we’re a fearful society. As our corporate structure becomes larger and even more automated and impersonal, we’re forced to conform or get out. Everyone is expendable, even the company president. So we’re afraid of losing our job. We’re afraid of the boss. We live in fear day in and day out. So we keep our mouth shut. We think twice before we speak up. In fact, we don’t speak up at all.

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We conform. We play the game. We put aside our individuality. We put aside our soul. And then we ask ourselves: what kind of freedom is this? Political freedom without economic freedom is meaningless. An individual who lives in economic subjection five or six days a week doesn’t become free merely by making an “X” on a ballot every other year. If freedom is to mean anything to the average person, it must include economic freedom. That’s why our democracy hasn’t always worked so well in the past. Because most of us don’t have time to get involved. We let a few people run things for us. We stay where we are, working on the job, just to survive and pay the mortgage. The American democratic system currently has 95 percent of us scratching just to make a living. Some of us aren’t even doing that. We barely have time to vote, let alone write letters to our legislators. Or try to help solve social problems. There’s just not enough time. Our children, our family, and ourselves come first, as well they should. But the question gnaws at us: what kind of freedom is this? A basic income guarantee would provide some of our missing freedoms. It would make each of us economically secure. We could take time out if we wanted to get involved actively in community and political affairs. We could find out what’s really going on in our country and in the world. Only then can we have a democracy in the true meaning of the word. “Is dignity, pride, and the meaning in our lives supposed to be found in full-time submission to a boss?” (Philippe Van Parijs, Belgian political theorist and author of Real Freedom for All (Oxford: Clarendon Press, 1997))

110. Is a Basic Income Guarantee a Form of Socialism? No. It’s distinctly a private approach. It places money in individual hands. It assumes that individuals should be free to make their own personal, private choices in spending this income according to their need. It eliminates the government bureaucracy that we have now, which is far more socialistic. By not involving the government as an employer of last resort, and by not requiring government-controlled, forced training programs, we further remove a BIG from the realm of socialism.

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It’s fully consistent with a private enterprise system of production. It requires the existence of a free market in which free choice can be exercised. “This simple, yet reliable, social safety net will preserve markets and private property. It is the opposite of socialism because it will shrink government. And everyone will be free to earn as much money as one can.” (Steven Shafarman, We the People: Healing Our Democracy and Saving Our World (Washington, DC: 2003))

111. Does the Government Have the Constitutional Authority to Provide a Basic Income Guarantee? Yes. Article 1, Section 8 says: The Congress shall have power . . . to provide for the common defense and the general welfare of the United States.

112. Is a Constitutional Amendment Necessary to Set Up a Basic Income Guarantee? Not at first, but eventually, yes. Congress can pass the necessary legislation for a BIG guarantee and the President can sign it, like any bill. But a Constitutional Amendment would help to establish a basic income as a vested right, just like freedom of speech or religion. It must be the right of everyone, without any distinction of age, color, morals, or religion. Otherwise, if it were provided only to the “deserving,” a future administration might easily change the definition of “deservingness.”

113. If the Government Is Responsible for the Welfare of Every Person, Doesn’t This Provide the Base for Government Tyranny? No more than it does today. But a constitutional amendment making a guaranteed income a basic right would help to guard against this possibility. If the right to a guaranteed income could be withdrawn under any circumstances, government would have the power to deprive the

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individual not only of the pursuit of happiness but also of liberty and even, in effect, life itself. This absolute right to a minimum income would be essentially a new principle in law. The governmental obligation to provide, out of taxes, such a minimum living standard for all should be taken as much for granted as free public schools have always been in our history. A basic income guarantee would promise to every citizen of the United States, who has legally lived in the United States for a period of five consecutive years, the right to an income from the federal government sufficient to enable him or her to live with dignity. No governmental agency, judicial body, or other organization whatsoever should have the power to suspend or limit any payments assured by these guarantees. “To have freedom, one requires a little money.” (Winston Churchill, Speech to British Parliament, London, 1945)

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How Is a Basic Income Guarantee Administered?

A Basic Income Guarantee can provide every adult American enough income for basic food and shelter. Funds will come from cutting government programs that will be superfluous, including welfare and especially ’corporate welfare,’ with all associated bureaucracies. —Steven Shafarman, We the People: Healing Our Democracy and Saving Our World (Washington, DC: 2003)

114. Who Will Be Covered under a Basic Income Guarantee? Every adult who is an American and who has legally lived in the United States for at least five years will be covered. For those here less than five years, emergency services will be provided as they are now.

115. Who Will Be Eligible to Receive Payments? Each adult who files an income tax return receives an annual “BIG” or “refundable tax credit” of $10,000—the approximate 2010 poverty level for one person. The “refundable tax credit” is available to everyone, rich or poor, similar to Social Security. All income other than this credit is taxed. If a person has no income at all, he or she keeps the full credit and pays no taxes. If a person has income of any kind (other than the credit), he or she must pay taxes. If the income is low, the amount to be paid in taxes will be less than the credit; the person will keep the difference and receive, in effect, a net transfer from the government. If a person’s income is

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in the middle range, what is paid in taxes will be quite close to the amount of the credit and he or she will break even (as though no taxes were paid and no transfer received). If a person’s income is high, the amount to be paid in taxes will be larger than the credit received and, in effect, the person will pay out the difference in positive taxes. The important point is that the system is universal—everyone files a tax return, everyone gets a tax credit, and everyone with any income pays taxes. There is no “means test,” no work requirement, and no explicit eligibility criteria. No one receives a net transfer from the government unless the taxes on the person’s income from all sources are lower than the tax credit. Benefits under this program are paid as a matter of right rather than privilege and in a way that does not segregate and stigmatize the poor. The vital point about the BIG plan is that it involves a merger of the welfare system and the tax system. The plan is administered by the Internal Revenue Service as an extension of the positive tax system. Each recipient’s grant is electronically deposited monthly into a bank account, similar to the way the Social Security system operates. Recipients of Social Security and other federal retirement programs receive either their current benefits or the BIG, whichever is larger. “To lift artificial weights from all shoulders; to clear the path of laudable pursuits for all; to afford all an unfettered start and a fair chance in life.” (President Abraham Lincoln, Presidential address, Washington, DC, 1863)

116. Will Illegal Aliens Be Covered? No.

117. Wouldn’t the United States Have to Alter Its Immigration Policies? No. That’s a separate issue. The BIG only goes to those who have lived here for at least five years. “You can only fear the future if you don’t know our past. If you know how this country really was built on immigration, you’ll understand that immigration is an added value. It is an invaluable energy infusion into this country. It always has been. If we close the doors it changes the definition of who we are.” (Lawrence O’Donnell, MSNBC, 2011)

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118. How Many People Will Receive the Basic Income Guarantee? Everyone who is eligible will receive it; in other words, most Americans. Some basic income guarantee (BIG) proposals advocate $10,000 a year for adults and $2,000 for each child under age 18. Other proposals favor more money for children. That’s a matter for negotiation.

119. What about the Very Rich, Like Warren Buffett? Why Should He Get Any Money? The genius of the Social Security system is that everyone who is eligible, rich or poor, gets it. There is no “means-testing.” Everyone is treated equally. So the program is accepted and popular. The wealthy pay back much of their Social Security grant in the form of income taxes. The same is the case with BIG. Excluding the very rich would create a cumbersome bureaucracy to screen them out. And it would destroy the equality, justice, and sense of community that comes from giving the grant to everyone.

120. How Is a Basic Income Guarantee Administered? Simply, by the Internal Revenue Service. A check is deposited into your bank account monthly by the IRS. No interviews, red tape, or waiting in lines. No government official checking you out.

121. What If the Cost of Living Goes Up? As the cost of living rises, the poverty level also rises, and the BIG would rise automatically.

122. Will I Get More If I Live in the City than in the Country? Or in the North Instead of the South? No. We know the cost of living varies from one region to another. But we don’t know exactly how much. And it changes. Besides, that’s one of the things that’s wrong with America. The migration to the cities has caused pollution, congestion, crime, and alienation.

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The BIG will partially reduce the differences in living standards throughout the country. Some might leave the city for cleaner air and more open space. The population might spread out over the land. If we tried to adjust payments by region, we would simply be slowing down the economic integration of the nation.

123. Could States Supplement the Federal Minimum Payments? Yes.

124. What about Emergencies? Despite careful planning, anyone can run out of money. Federal funds should be authorized to enable each state to meet emergency needs.

125. Will It Encourage Family Members to Split Up? It shouldn’t. There won’t be much incentive for well-off families to live apart as a way of increasing total family income.

126. What Happens to All the Existing Welfare Programs if We Adopt a BIG? Some programs, such as the Earned Income Tax Credit and SNAP will be carefully phased out. Others may be gradually reduced as a BIG is implemented so as not to cause undue hardship. States would still have the option of providing short-term emergency aid. The dominant role in providing cash income support would be the job of the federal government through the IRS. In time, the basic income guarantee could replace many of the various service programs, like public housing, school lunch, and so on. It would accomplish the same objectives more efficiently, at lower cost to the taxpayer, and with a sharp reduction in bureaucracy. We would phase the Social Security system into the BIG, honoring current commitments.

127. What If There’s a Recession? In any recession, it would be easy to increase the amount of BIG, protecting everyone from hardships. That could also be a simple way

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to end the recession, by increasing the amount of money being circulated and spent.

128. What If There’s Inflation? First, there’s no reason why a BIG would cause inflation. We will be cutting existing government programs at the same time, offsetting the addition. We might well introduce BIG in phases, starting with a smaller amount. Second, the BIG will be indexed to inflation. As inflation rises, so does the BIG grant.

129. If Government Ends Corporate Welfare and Subsidies, Won’t the Stock Market Crash? Some stock prices might fall, but government bonds will probably appreciate. Once established, BIG will promote long-term stability— social, political, and economic—and, thus, stock market growth that is more sustainable.

130. How Would BIG Encourage Economic Growth? A BIG will enable people to improve their living conditions. They would have a little bit more money to spend on food, health care, making improvements to their homes, and so on. Increased spending would mean more economic activity and more jobs. As people become happier and healthier, worker productivity also improves. People will be able to plan for the future and to take small risks, such as investing in education, looking for work, or even starting their own businesses. By promoting greater equality and giving everyone a stake in the society and economy, a BIG will also produce a more stable society.

131. What If the Plan Doesn’t Work? We can expect bugs in any new program. Conditions change. A regular, systematic evaluation will be needed. The legislation that establishes the program should also create a permanent review commission. It would report annually to the president and the Congress on the operation of the program, and recommend needed changes. It should be independent of the agency administering the program and

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of other government agencies. To start, the program could be a “sunset” law. Give it a five-year life span. If it doesn’t work, we change it or drop it. “The whole of human history has recognized the principle— at least in the abstract—that the rich and the powerful have a moral obligation to assist the poor and the weak.” (Robert S. McNamara1)

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What’s Happening with BIG around the World?

Not conceived as a handout, the Alaska Permanent Fund Dividend embodies the idea that all Alaskans own their resources in common and every person should benefit from these resources. In the form of an unconditional payment, the dividend respects the freedom of each person to use it as he or she sees fit. Because everyone has a stake in the dividend, Alaskans are vigilant and hold the fund’s management accountable. —Michael Howard, professor of philosophy at the University of Maine and coeditor with Karl Widerquist of Exploring the Alaska Model: How the Permanent Fund Dividend Can Be Adapted as a Reform Model for the World (New York: Palgrave Macmillan, 2012)

132. What Is the Alaska Permanent Fund Dividend? Perhaps the most important outcome of the guaranteed income movement of the 1960s and 1970s happened not at the federal level but in the state of Alaska. Since 1982, Alaska has distributed a portion of its oil royalties to every Alaska resident of at least one year. In 2011, every man, woman, and child received a check for $1,174. That’s $4,696 for a family of four. The Fund was an outcome of the guaranteed income movement because many Alaskan legislators, most importantly Governor Jay Hammond, were aware of and influenced by it. The Permanent Fund is the closest thing to a basic income that exists in the world today. It is hugely popular in Alaska. In 1999,

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residents voted 84 percent against an initiative to curtail it. It has become the “third rail” of Alaskan politics. No legislator would dream of advocating its repeal. Many regional and national governments around the world are considering imitating it. The Fund is one of the reasons why Alaska has one of the lowest poverty rates in the United States, why it is the most economically equal state, and why it is the only state in which equality has been rising for the past 20 years. Sociologists have found that most Alaskans use the money sensibly: to pay bills, invest in education, save for retirement, buy a new coat for their child, and so on. The Permanent Fund is a basic income in that it guarantees that everyone unconditionally receives some basic amount of income each year without a means test or work requirement. Any U.S. citizen who meets the residency requirement and applies for the grant gets it, whether or not they work, whether or not they are married or single, young or old, rich or poor. No one can tell Alaskans that they must do so-and-so to get the money, and no one can tell them what they must do with the money once they get it. That is the essence of BIG.

133. What’s Happening With BIG Overseas? Overseas, BIG has supporters in Ireland, Finland, South Africa, Belgium, Germany, India, Canada, Austria, Korea, Namibia, the UK, Netherlands, Denmark, Brazil, Japan, and Italy. BIG national conferences have been held in most of those countries. A number of political parties—usually green or “left-liberal” (in the European sense)—have now made it part of their official party program. The 11th annual North American BIG Conference was held in Toronto in May, 2012. (www.usbig.net) The 13th biennial Basic Income Earth Network (BIEN) Conference drew more than 500 speakers and attendees to San Paolo, Brazil, in July 2010. The 14th BIEN Conference is set for Munich, Germany, in September 2012. (www.basicincome.org) Brazil In 2003, Brazil passed a bill—authored by Senator Eduardo Suplicy and signed by President Luiz Ignacio Lula da Silva—creating a basic

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income for the most needy: the “Bolsa Familia.” When fully implemented, the plan will ensure that all Brazilians, regardless of their origin, race, sex, age, social or economic status, will have a monetary income enough to meet their basic needs. Brazil has become the first nation in history to grant the unconditional right of subsistence to all inhabitants. ReCivitas is a nonprofit organization in Brazil that has established a local basic monthly income of 30 Brazilian Reals (about US$19) each for 83 people in the village of Quatinga Velho. Funding is provided entirely by private donations, but the group is collecting investments from as far away as Japan. The organizers hope soon to use some of the money to support the basic income pilot project in Namibia, and they plan soon to expand to Germany. (www.recivitas.org.br) South Africa In 2004, a South African government task force strongly supported implementation of a basic income of 100 rand (US$10) a month for each person aged 7 to 65. The plan was promoted by a coalition of labor unions, churches, children’s advocates, the elderly, women, and AIDS activists. The South African government has not yet adopted their recommendation. Nigeria In 2011, the governor of Anambra State in Nigeria created a selective basic income to be given to 1,050 people in the state for one year, to be followed by one lump sum payment at the end of the year. It is hoped that this program will help recipients get out of poverty and establish themselves in business. European Union In 2010, the Parliament of the European Union adopted, 437:162, a non-legislative resolution on the role of minimum income in combating poverty and promoting an inclusive society in Europe. The EU Parliament now urges member states to establish a threshold for a minimum income, at a level at least 60 percent of average income in the member state. The EU official poverty line is at 60 percent of the median, not average, income. (www.europarl.europa.eu/oeil/file .jsp?id=5845352)

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Japan In 2011, several members of the Japanese Parliament and representatives of both governing and opposition parties attended a parliamentary meeting regarding basic income. More than 100 citizens also attended. The Japanese government was asked to provide “unconditional secured basic income for individual sufferers.” (www.bijp.net /newsinfo/article/252) France Former French prime minister (2005–2007) Dominique de Villepin, well known for his opposition to the 2003 invasion of Iraq, recently launched a basic income campaign, which may well be a central feature of his electoral platform in his 2012 campaign for president. (www.republiquesolidaire.fr) Germany More than 50,000 German citizens have signed an electronic petition to the German Parliament calling for the introduction of a basic income. The pro-business Free Democratic Party of Germany has suggested a basic children’s income to replace all parenting and child payments, according to The Local, an English-language online newspaper. Five of the six major parties in Germany have basic income factions. Dozens of members of the German Parliament have endorsed BIG. (www .spiked-online.com/index.php/site/reviewofbooks_article/10136/) Kuwait The Kuwaiti Parliament has voted to distribute an unconditional cash grant of 1,000 dinars (US$3,580) and free essential food items to each of Kuwait’s 1.55 million citizens for 14 months from May 2011 to July 2012. The total cost of the package will be over $5 billion. (www.news.yahoo.com/s/afp/20110126/wl_mideast_afp /kuwaiteconomygrant_20110126110550) Mongolia The coalition government of Mongolia is taking steps to make good on promises made in the 2008 election to introduce an Alaskan-style resource dividend. Mongolia is a large, sparsely populated landlocked

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country sandwiched between Russia and China. About half of its citizens still live as nomadic herders. The country has recently discovered some of the world’s most valuable mineral deposits, including gold, copper, coal, and other resources. The Mongolian government wants to ensure that every Mongolian receives financial benefit—about US$17 per person per month. It is also exploring making every Mongolian a 10 percent shareholder in the state’s mining enterprise. It is also considering a Sovereign Wealth Fund, designed after studying the Alaska Permanent Fund, which would pay regular dividends. (www.af.reuters.com/article /energyoilnews/idAFL3E71P1CG20110808?sp=true; www.mongo liaeconomy.com/?p=698) India In 2011, two basic income pilot projects were begun in India. In an urban Delhi project, families receive about US$22 per month. In a rural project, adults receive about US$4.40 per month. The sponsors will compare the results to a “control group” that receives no additional transfers. Guy Standing, honorary cochair of BIEN, helped to conceive and organize the project. (www.guystanding.com/) Iran Iran is distributing a small basic income to all citizens who apply. The program replaces a system of subsidies on commodities such as fuel and food. (www.iied.org/sustainable-markets/blog/iran -sleepwalking-towards-universal-income-grant) Iraq In 2003, U.S. Secretary of State Colin Powell said he favored an idea to distribute $8 billion of Iraq’s $20 billion in oil revenues directly to Iraq’s 6 million households. It would give every Iraqi adult roughly $1,600, more than half the annual salary of a middle-class worker. A Zogby poll showed nearly 60 percent of Americans supported using oil revenues to compensate Iraqi citizens. But the idea soon vanished from public debate. As of 2011, the Iraqi government is reportedly considering distributing a small dividend of about US$15 per person per month.

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Switzerland In 2011, the National Council of Switzerland reportedly rejected an unconditional basic income, fearing that it would reduce the incentive to work. (www.bedingungslos.ch) Singapore On May 1, 2011, the Singapore government distributed a “growth dividend” to almost all adult citizens—about 2.5 million people. Eighty percent of citizens received about US$488 to $US650. It has not promised to distribute dividends every year. (www.singaporebudget .gov.sg/budget_2011/pd.html#s7) Namibia From 2008 to 2010, a basic income pilot program was conducted in Otjivero, Namibia. The money was raised and the program was run by a coalition of labor and church groups. Each of 930 villagers received 1,000 Namibian dollars (US$12.40) each month. The results were positive. From a desolate settlement of farm workers, the village grew into a community. Malnutrition rates of children under five fell from 42 percent to zero. Dropout rates at school fell from 40 percent to almost zero. It led to an increase in small business, such as brick making, bread baking, and dressmaking. It increased the buying power of the villagers, creating a market for the products of the new businesses. Bertha Hamases, a recipient of the grant, said that the money helped her to land a job. How did it affect the town? “The children all buy school uniforms and parents pay the school fees,” she replied. “People buy food and purchase TVs and stoves. Where there were a few shops before, now there are 10–12 little shops. The town is much cleaner because people don’t mind cleaning when they are fed and not hungry. Crime has stopped totally, while alcoholism and the beating of women has become much less.” This increase in employment contradicts the idea of critics that an unconditional basic income has a negative effect on work motivation. The BIG coalition hopes to persuade the Namibian government to introduce a national basic income in Namibia. (www.oberserver .com.na/component/content/article/8-newsf lash/600-youths-insupport-of-big; www.bignam.org/publications/pledge%20form%20 web.pdf )

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Ireland Sean Healy and Bridget Reynolds, working with the CORI Justice Commission, created a “Green Paper on Basic Income” to facilitate and encourage further debate and discussion, and to discuss a possible framework for the development of a basic income system in Ireland. (www.cori.ie/justice) The Irish Liberal Party is a small, new political party that supports “social justice policies of basic income for all and the Land Valuation Tax.” Korea In 2010, hundreds of people gathered in Seoul, Korea, for two intense days of lectures and discussions entirely devoted to the proposal of an unconditional basic income. Among the speakers were Philippe Van Parijs, chair of BIEN’s international board, and Brazil Senator Eduardo Suplicy, honorary cochair of BIEN. The meeting ended with Senator Suplicy leading the audience in singing Blowing in the Wind. (www.cafe.daum.net/basicincome) United Kingdom In 2011, the Citizen’s Income Trust, the British basic income network, held several sessions at the Social Policy Association Conference in Lincoln. Italy The local government of the Lazio Region (which includes Rome) approved a law for an income guarantee for the unemployed and precarious. Funding for the new program has been inadequate, and there were demonstrations in Rome in favor of the measure. (www.bin-italia .org/informa.php?ID_NEWS=252) Canada Canada has a strong group of BIG advocates, including conservative Senator Hugh Segal. From 1974 to 1979, Canada conducted a guaranteed income field experiment in the province of Manitoba, called “Mincome.” The project published no official findings concerning whether participants

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lowered work efforts. The study died a quiet death in 1979 and the vast amount of data was archived. But the files were recently discovered. A preliminary conclusion is that the number of hours worked by men in the “treatment group” was only 1 percent less than that by the control group. That compares to the American NIT experiments, which averaged 6 percent less hours worked by men. Researcher Evelyn Forget’s preliminary findings, released in September 2011, show an “8.5 percent reduction in the hospitalization rate for participants relative to controls, particularly for accidents and injuries and mental health.” She also found that participant contacts with physicians declined, especially for mental health, and that more adolescents continued into grade 12. She found no increase in fertility, family dissolution rates, or improved birth outcomes. She concluded that “a relatively modest basic income guarantee can improve population health, suggesting significant health system savings.”1

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Can America Be Convinced?

If evil men can work together to get what they want, so can good men work together to get what they want. —Leo Tolstoy, War and Peace, first published 1869, Penguin Classics

134. Why Do Some Support and Some Oppose a Basic Income Guarantee? Most people who oppose the concept of a basic income guarantee are sincere, hardworking, well-meaning people who simply feel it’s wrong to give people money for not working; that people should work for what they get. Many who support a BIG see people as inherently good; that, given a chance, people will behave in a thoughtful, intelligent manner. Many who oppose the idea see people as basically weak or evil; that people must be controlled and regulated; that too much freedom will lead to anarchy. Many who support it see freedom and liberty as essential to a full, rewarding life.

135. Who Is Right? It’s the age-old question about the basic nature of people. The conflict between these two philosophies is as old as time. It’s said that on the day one person invented the wheel, someone else invented a no-parking sign. And there’s been a continual conflict ever since. Even our own Constitution reflects these contradictory philosophies. The Declaration of Independence and the Bill of Rights declare that all men are created equal. But the body of the Constitution says a “Negro . . . is to be counted as three-fifths of a person.”

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The men who drafted the Declaration of Independence and Bill of Rights were men who believed that people are basically good. They believed in liberty and freedom; in our ability to govern ourselves. The men who wrote the body of the Constitution tried to check democracy. They denied the vote to whole segments of the population—women, blacks, the young, the poor. The Bill of Rights is the thing that gives us our freedoms. It hangs, sort of like a cocker spaniel tail on a Great Dane, on the body of the Constitution. It doesn’t even fit, because it’s a whole different philosophy. And there has been conflict between those two documents throughout our history. The truth, of course, is that human nature is both good and evil. Each of us has our own inner conflict. Each of us is capable of bravery, unselfishness, love, charity, honesty, and compassion. Each of us is capable of greed, avarice, fear, selfishness, dishonesty, and worse whenever they present themselves in acceptable terms. Civilization is the continuing struggle to keep the good guys a step ahead of the bad guys.

136. Why Should Conservatives Favor a Basic Income Guarantee? Conservatives have long opposed big government. They have rightly felt that government should do for the people only what the people cannot do for themselves. Conservatives believe that individuals, given a fair start, can manage and handle their own affairs better than a government bureaucracy. This is exactly what a BIG will do—give each person a fair start. It will remove the government from the day-to-day, cradle-to-grave guidance and supervision of the individual. Outside of providing for the basic necessities to stay alive, the government will leave an individual’s chances for success or failure up to his or her own efforts. “The question is whether we believe that individuals need to be guided, guarded and controlled in every facet of their lives or whether the judgment of the individual is usually better than that of a bureaucrat with little time or flexibility. Conservatives today have an unparalleled opportunity to make their point.” (Robert Theobald, The Guaranteed Income (Garden City, NY: Doubleday & Company, 1966)) “My proposal for a negative income tax is more compatible with the philosophy and aims of the proponents of limited government and maximum individual freedom than with the philosophy

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and aims of the proponents of the welfare state and great government control of the economy.” (Milton Friedman, Capitalism and Freedom (Chicago, IL: University of Chicago Press, 1962))

137. Why Should Liberals Support a Basic Income Guarantee? Liberals have long believed that we are our brother’s keeper. Liberals believe that “if one person is hungry, so am I”; that “if one person is in prison, I am not free”; that we should “ask not for whom the bell tolls; it tolls for thee.” Webster defines a liberal as “favoring progress and reform in social institutions; characterized by generosity.” Liberals believe people, by acting together, can enlarge their own destinies. Liberals have traditionally fought for justice for all human beings— both political and economic justice. Liberals have fought to remove barriers that limit citizens because they’re black, brown, young, or women; because they never had the chance to gain an education; because there was no possibility of being anything but what they were. A basic income guarantee would help achieve long-standing liberal goals: to lower the concentration of wealth, to provide progressive taxation, to distribute income fairly, and to guarantee a decent living for all. A basic income guarantee would help achieve the principles that liberals most cherish and have worked for centuries to achieve. “I believe that as long as there is plenty, poverty is evil.” (Robert Kennedy, 1968 Democratic Party Presidential Candidate, Speech in Indianapolis, May 1968) “We reaffirm the long-established principle of allocating the tax burden according to the ability to pay . . . we are determined to make economic security a matter of right.” (Democratic Party platform, 1972) “I can’t help it. If I know that one guy, somewhere, is starving, it puts a crimp in my evening.” (Woody Allen, Annie Hall)

138. Shouldn’t We Tackle World Poverty First? If we’re insensitive to poverty at home, how can we attack poverty abroad? The more fairly our economic income is distributed at home, the more likely is that we’ll be sensitive to those in other countries.

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We need to be a better model for other countries to copy. The greater the equality in our own society, the more pressure we can place upon other countries to develop their societies. This is not to say we should lessen our efforts to end world hunger. In 1947, the United States adopted the Marshall Plan, an inspiring program. We contributed 2 percent of our Gross National Product. It saved Europe. Today, the United States and other nations are working to end world poverty by • expanding access to education, • ensuring that microfinance funding reaches the poor, • increasing access to vaccines against pneumonia and diarrhea among young children, and • combating HIV/AIDS, malaria, tuberculosis, and other diseases. Congress has increased funding for basic education nearly ten-fold since 2001, but progress toward universal basic education is slow. There are currently 72 million primary school-aged children out of school around the world. Microfinance is a successful, cost-effective tool to help the very poor (those living on less than $1.25 a day) lift themselves out of poverty. In the late 1970s, the U.S. National Academy of Sciences— hundreds of experts from around the country—came out with a report concluding that world hunger and the worst aspects of poverty could be ended within one generation. What was missing was political will. In other words, there are enough resources on this planet to make sure that no one goes hungry or malnourished. But until political will becomes a reality, world hunger and malnutrition will continue to exist. In the United States and in the richest industrial nations, productivity, wealth, and national incomes have grown sufficiently to support an adequate BIG. “The commitment I seek is not to outworn views, but to old values that will never wear out. Programs may sometimes become obsolete, but the ideal of fairness always endures. Circumstances may change, but the work of compassion must continue. The poor may be out of political fashion, but they are not without human

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needs. The middle class may be angry, but they have not lost the dream that all Americans can advance together.” (Senator Ted Kennedy, Democratic Convention, 1980)

139. Won’t It Take a Long Time to Convince America? Perhaps. But let’s not forget that this country changed its attitude about the Soviet Union four times in forty years. And it was done deliberately and consciously. The former “ferocious, slant-eyed communist menace of Red China” is now a bicycle-riding, hardworking, smiling, productive nation of Pepsi-Cola drinkers. When the system and the institutions of our society and people who influence public opinion decide it’s in their own enlightened interest to have Americans think in a certain way, it doesn’t take long. If we can sell Americans the idea that they need three television sets or two cars when we can hardly move one, with the traffic and gas prices today, we ought to be able to sell this kind of idea to improve human relations.

140. What Can I Do? Here are a few suggestions: 1. 2. 3. 4. 5.

6. 7. 8. 9.

Tell your friends about this book. Write to your congressional representative in Washington. Write to your U.S. senators. Write to the president. Tell them the basic income guarantee is an idea whose time has come. Offer a reason or two that you’ve gleaned from the book. Urge them to support a minimum income for all Americans. If they won’t, think about working in the next campaign for someone who will. Keep telling them. No single letter, phone call, email, or visit will influence legislation. Get your friends and neighbors to help you maintain a continuing dialogue with your elected representatives. Accept no evasions. Each of us has a PhD in What’s-It’s-Liketo-Live-in-America. So don’t let your representative give you the “if-you-knew-what-I-know” routine. If they give you that stuff, ask them what they know. Tell them what you know.

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10. Write a letter to your local paper. Don’t get discouraged if they don’t print it. Most papers only print a fraction of the letters they receive. 11. Letters to the president or the Congress or your local newspapers can influence public opinion and votes. 12. Make your letters short and to the point. Refer to current events, upcoming votes, or newspaper stories. Commend elected officials for past votes or actions that you supported. Try to get them on record about upcoming decisions. 13. Feel really ambitious? Call your local radio talk show and discuss the basic income guarantee. If you’re a little uncertain or inexperienced in this, call a friendly talk show host. Prepare a few notes of the points you want to get across. Don’t read. If you’re feeling feisty and ready for battle, call a narrow-minded opinionated host. One who’ll disagree with you. It’ll make great listening. 14. Read more about the basic income guarantee. 15. Bring up the basic income guarantee at your club, your church, in school. It’s a good discussion topic. 16. Help shape local public opinion by joining or organizing a local committee to challenge federal spending priorities. 17. Look into the impact of cuts in social programs in your community—how many workers were laid off? How many school children no longer have an adequate lunch program? How many citizens will be losing welfare benefits? Through radio and TV talk shows, letter writing campaigns, city council resolutions, and organizational endorsements, local groups can play a key role in building a visible, effective constituency for the rational expenditure of tax dollars. “Do unto others as you would have others do unto you.” (Jesus Christ, New Testament, Luke, 6:31) “Who can protest and does not, is an accomplice in the act.” (Talmud)

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CH A P T ER

2 2

Realistically, What Are the Chances for a BIG in the United States?

Why have welfare at all? For most of us, it is simply instinctual behavior; we look after our own. In a good country, your own includes a lot of people. It includes everybody. —U.S. Senator Daniel Moynihan of New York during the FAP debates in the 1970s

141. Is Anyone Seriously Proposing a BIG for the United States? No. The basic income guarantee (BIG) movement is clearly made up of academics and activists who are aware that it is a long road to get the idea back onto the mainstream political agenda in the United States. One attempt that has seen some success is the refundable Child Tax Credit, officially called the “Additional Child Tax Credit.” Since 1998, a portion of the $1,000 Child Tax Credit has been refundable. Like the Earned Income Tax Credit, the CTC allows people whose income is so low that they pay little or no federal income tax to receive part of their tax credit in cash. The amount started at $400 per child in 1998 and it has since risen to $1,000. This policy follows the BIG model in the sense that it gets cash into the hands of the caregivers of all children unconditionally. One proposal from the right incorporates a very small BIG. The so-called Fair Tax movement wants to replace the income tax and all other federal taxes with a national sales tax. Part of the revenue from the tax would be redistributed in the form of a very small

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dividend designed to ensure that no person living in poverty is a net taxpayer.

142. Has a Basic Income Guarantee Bill Ever Been Introduced in the U.S. Congress? Yes. On May 2, 2006, Congressman Bob Filner of San Diego introduced the Tax Cut for the Rest of Us Act. It was given the number HR 5257. The preamble to the bill read: “To amend the Internal Revenue Code of 1986 to provide a basic income guarantee in the form of a refundable tax credit for taxpayers who do not itemize deductions.” The bill was referred to the House Ways and Means Committee. The plan was simple. It removed the lines for the standard deduction and personal exemptions from the federal tax forms and replaced them with a line for the standard tax credit at the bottom of the form. All tax rates would remain the same. A standard tax credit of $2,000 for each adult and $1,000 for each child would create a tax cut for everyone with an income under about $60,000 a year. It was the first basic income bill ever introduced in the U.S. Congress. Some congressional aides and nonprofit groups thought HR 5257 was “brilliant.” Others also liked the idea, but felt the cost—estimated at an annual $186 billion—was too steep. And still others questioned whether “paying people not to work” was the way to go. The bill garnered only one cosponsor—Congressman Jesse Jackson Jr. of Illinois—and failed to get out of the Ways and Means Committee. Generally, people over age 50 were familiar with BIG from FAP and other proposals in the 1970s. But those under age 50 had never heard of BIG and had to be carefully walked through the idea. A few people said that BIG might have been viable in the 1960s, but not now. Some said that much of the New Deal has been destroyed; that we are headed—if not already there—for a new Gilded Age. They felt BIG is hopeless while the current political mood exists. Even in one-on-one conversations with friends and acquaintances, there was surprising resistance to the BIG idea. It seems everyone knows of at least one “despicable” person in their world. The thought of giving taxpayer money to that person is more than they can stomach. One woman said: “People are savages.”

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143. Let’s Face It. A Full BIG of $10,000 Might Be Too Tough a Sell. How about Starting with a Partial BIG of, Say, $3,000 or $5,000 a Year? Yes, that might be the only realistic way a BIG could get started. That would cut the total cost in half or a third of our estimate of nearly $2 trillion (see chapter 13) for a full BIG. We could still cut some of the current tax loopholes and social programs, but on a smaller scale. If a partial BIG worked, we could gradually move to a full BIG.

144. What Is the “Second Bill of Rights?” The “Second Bill of Rights” was a proposal made by U.S. President Franklin D. Roosevelt during his State of the Union Address on January 11, 1944. He suggested the nation had come to recognize, and should now implement, a second bill of rights. Roosevelt did not argue for any change to the U.S. Constitution. He argued that the second bill of rights was to be implemented politically, not by federal judges. Roosevelt’s stated justification was that the “political rights” guaranteed by the Constitution and the Bill of Rights had “proved inadequate to assure us equality in the pursuit of happiness.” Roosevelt’s remedy was to create an “economic bill of rights” that would guarantee a job with a living wage, freedom from unfair competition and monopolies, a home, medical care, education, and recreation.1 It is our duty now to begin to lay the plans and determine the strategy for the winning of a lasting peace and establishment of an American standard of living higher than ever before known. We cannot be content, no matter how high that general standard of living may be, if some fraction of our people—whether it be one-third or one-fifth or one-tenth—is ill-fed, ill-clothed, illhoused, and insecure. This Republic had its beginning, and grew to its present strength, under the protection of certain inalienable political rights—among them the right of free speech, free press, free worship, trial by jury, freedom from unreasonable searches and seizures. They were our rights to life and liberty. As our nation has grown in size and stature, however—as our industrial economy expanded—these political rights proved inadequate to assure us equality in the pursuit of happiness.

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We have come to a clear realization of the fact that true individual freedom cannot exist without economic security and independence. Necessitous men are not free men. People who are hungry and out of a job are the stuff of which dictatorships are made. In our day these economic truths have become accepted as selfevident. We have accepted, so to speak, a second Bill of Rights under which a new basis of security and prosperity can be established for all—regardless of station, race, or creed. (President Franklin D. Roosevelt, State of the Union Address, January 11, 1944)

145. So What’s the Realistic Outlook for a BIG in the United States? The issue of poverty remains unpopular in the United States. Whenever elected officials ask their constituents what issues are the most important to them, poverty isn’t even on their list. They ask about the economy, jobs, abortion, the environment, health care, and education, but not about poverty. No political candidate—with the one exception of John Edwards— ever mentions the word. Political campaign advisers say the issue of poverty is a loser and turns voters off. No major reform proposal aimed at increasing aid to the poor and unemployed has been seriously discussed since the defeat of President Carter’s Program for Better Jobs and Income in 1979. Even in today’s tough economic times, the idea of the federal government providing basic living funds to all Americans is an unpopular one. The latest Rasmussen national telephone survey of likely voters shows that only 11 percent favor a proposal for the federal government to provide every single American with a basic income grant, or enough money to enjoy a modest living regardless of whether they choose to work or not. Eighty-two percent oppose this idea. Nineteen percent of Democrats favor a basic income grant in the United States, a view shared by just 3 percent of Republicans and 9 percent of independents. BIG fell off the national agenda more than 30 years ago and is nowhere near to being back on it. None of the Washington, DC nonprofit groups are working on it—or even thinking about it—as a solution to poverty and the increasing gap in income and wealth in America. But political moods change, sometimes quickly and surprisingly. BIG’s most recent American advocate is Charles Murray. In his book, In Our Hands, Murray agrees with Milton Friedman and proposes a $10,000 yearly grant paid to every adult, with no work

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requirement. Murray argues it would save money because there would be no bureaucracy to support and no red tape to manage. The United States is still an important arena for BIG. It was the first to have a mainstream national political movement for BIG. Under the FAP bill of 1970, the United Sates came closer than any other country to introducing a nationwide BIG. The state of Alaska has the world’s first BIG, if only a partial one, in the form of the Alaska Permanent Fund. Given the political climate, BIG supporters have concentrated on making sure they have a well-thought-out proposal ready, and to push for reforms that move in the direction of BIG. Refundable tax credits, such as the EITC and the CTC, have already proved successful and popular. “Our basic function is to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.” (Milton Friedman, Capitalism and Freedom (Chicago, IL: University of Chicago Press, 1962))

146. An American Tradition: Embracing an Unconventional New Idea. BIG is an idea that appeals not only to the conscience of America but also to the greatness of America. It’s time we had an America where those who have more will reach out and help those who have less. It’s time for an America where we don’t just talk about family values but where we actually value families. Granted, if men and women are inherently irresponsible bums, the idea of providing a minimum income to everyone is the most stupid idea anyone can come up with. But if we believe that humans can become responsible, then a basic income guarantee may be the only thing that can lead us into a freer society. The American Dream is not “I’ve got mine; you get yours.” We’re all in this together. We can end poverty, close the wealth gap, and provide economic security to everyone by giving all citizens a modest, yet unconditional, income. That should be our mission. That should be our challenge. That should be our goal. Our individual desire for change carries extraordinary power to become more than we are. Better than we are. Forged in the

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human heart, ignited by love and passion for transformation, our common unity, our common purpose and our common action carry the power to change everything. This is the power of human unity. This is the power of our Oneness. Feel it. Own it. Act upon it. (U.S. Congressman Dennis Kucinich of Ohio, Speech at Hempfest in Seattle, Wash., August 20, 2011)

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A P PE N DI X

A

The Cost of a Basic Income Guarantee

1. Eliminate Some of the 173 Tax Loopholes The Internal Revenue Service lists 173 “tax expenditures,” also known as “tax loopholes,” for fiscal year 2010 (October 1, 2009 to September 30, 2010). As mentioned in chapter 13, the total of these expenditures comes to $1,025 billion. In our analysis of how the United States can afford a full Basic Income Guarantee, we propose eliminating 80 percent of this total, thus increasing Treasury revenues by $820 billion a year. The actual expenditures to be eliminated will be a matter of negotiation and compromise. Listed below are all the largest expenditures (loopholes) (Appendix Table 1). This will give us an idea of where most of the $1,025 billion is currently going. And it provides us with insight as to places we could cut. We recommend the elimination or reduction of most of these loopholes.

Appendix Table 1

List of Tax Expenditures

ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEAR 2010 (in millions of dollars) National Defense: Exclusion of benefits and allowances to armed forces personnel International Affairs: Exclusion of income earned abroad by U.S. citizens Exclusion of certain allowances for Federal employees abroad Inventory property sales source rules exception Deferral of income from controlled foreign corporations Deferred taxes for financial firms on certain income earned overseas

$12,740 $12,740 6,800 970 2,680 38,130 2,330 50,910 continued

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Appendix Table 1 Continued General Science, Space, and Technology Expensing of research and experimentation expenditures Credit for increasing research activities Energy: Expensing of exploration and development costs, fuels Excess of percentage over cost depletion, fuels Energy production credits Temporary 50% expensing for equipment used in refining liquid fuels Credit for energy efficiency improvements to certain homes Other (expenditures ranging from 0 to 399) Natural Resources and Environment: Excess of percentage over cost depletion, nonfuel minerals Exclusion of interest on bonds for water, sewage, and hazardous waste Other Agriculture: Capital gains treatment for certain income Other Financial Institutions and Insurance: Exemption of credit union income Exclusion of interest on life insurance savings Other Housing: Exclusion of interest on owner-occupied mortgage subsidy bonds Exclusion of interest on rental housing bonds Deductibility of mortgage interest on owner-occupied homes Deductibility of State and local property tax on owner-occupied homes Deferral of income from installment sales Capital gains exclusion on home sales Exclusion of net imputed rental income Exception from passive loss rules for $25,000 of rental loss Credit for low-income housing investments Discharge of mortgage indebtedness Credit for home buyer Other Commerce: Cancellation of indebtedness Treatment of qualified dividends Capital gains (except agriculture, timber, iron ore, and coal) Step-up basis of capital gains at death

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3,560 5,890 9,450 400 980 1,670 760 3,190 1,990 8,990 770 460 890 2,120 490 390 880 1,270 19,910 100 21,280 1,230 1,050 79,150 15,120 620 22,160 41,200 8,790 5,650 1,480 13,680 1,490 188,640 750 31,050 36,300 39,520

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Carryover basis of capital gains on gifts Accelerated depreciation of machinery and equipment Expensing of certain small investments Graduated corporation income tax rate Deduction for U.S. production activities Other Transportation Exclusion of reimbursed employee parking expenses Exclusion for employer-provided transit passes Other Community and Regional Development: Exclusion of interest for airport, dock, and similar bonds Empowerment zones and renewal communities New markets tax credit Other Education Exclusion of scholarship and fellowship income Lifetime Learning Tax Credit American Opportunity Tax Credit Deductibility of student-loan interest Deduction for higher education expenses State prepaid tuition plans Exclusion of interest on student-loan bonds Exclusion of interest on bonds for private nonprofit educational facilities Parental personal exemption for students aged 19 or above Deductibility of charitable contributions (education) Exclusion of employer-provided educational assistance Other Training, Employment, and Social Services Work opportunity tax credit Employer-provided child care exclusion Assistance for adopted foster children Adoption credit and exclusion Exclusion of employee meals and lodging (other than military) Child credit Credit for child and dependent care expenses Deductibility of charitable contributions, other than education and health Exclusion of certain foster care payments Exclusion of parsonage allowances Making work pay tax credit Other

1,400 39,790 950 3,000 13,140 –10,590 155,310 2,970 580 310 3,860 840 730 720 230 2,520 2,760 3,490 15,110 1,480 760 1,390 550 2,340 2,960 3,930 680 530 35,980 1,110 1,220 460 660 1,060 23,030 3,470 34,080 420 660 38,850 190 105,210 continued

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Appendix Table 1 Continued Health: Exclusion of employer contributions for medical insurance premiums Self-employed medical insurance premiums Medical savings accounts/health savings accounts Deductibility of medical expenses Exclusion of interest on hospital construction bonds Credit for employee health insurance expenses of small business Deductibility of charitable contributions (health) Tax credit for orphan drug research Special Blue Cross/Blue Shield deduction Other Income Security: Exclusion of workers’ compensation benefits Exclusion of public assistance benefits Net exclusion of pension contributions and earnings: Employer plans 401(k) plans Individual retirement accounts Low and moderate income savers credit Keogh plans Exclusion of premiums on group term life insurance Special ESOP rules Additional deduction for the elderly Earned income tax credit Exclusion of employment insurance benefits Other Social Security: Exclusion of social security benefits for retired workers Exclusion of social security benefits for disabled workers Exclusion of social security benefits for spouses, dependents, survivors Veterans Benefits and Services: Exclusion of veterans death benefits and disability compensation Exclusion of GI Bill benefits Other General Purpose Fiscal Assistance: Exclusion of interest on public purpose state and local bonds Deductibility of non-business state and local taxes other than homes Interest: Deferral of interest on U.S. savings bonds Totals of all 173 Tax Expenditures (Loopholes)

160,110 5,680 1,790 9,090 3,530 2,300 3,850 470 750 260 187,830 6,770 640 39,580 52,240 12,630 1,130 13,820 1,950 1,400 1,890 4,910 5,220 1,150 143,330 21,440 7,040 3,850 32,330 4,130 450 230 4,810 30,440 26,890 57,330 1,180 1,180 $1,024,700

Source: All tax expenditure figures are from the Internal Revenue Service.

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APPENDIX A

157

2. Eliminate the Standard Deduction and Personal Exemption a. Standard Deduction The IRS does not calculate a tax expenditure for the Standard Deduction. We estimated this figure by multiplying the 2010 standard deductions taken (est. $600 billion) by 20 percent (the average tax rate paid by individuals) to get $120 billion.

b. Personal Exemption The IRS does not calculate a tax expenditure for the Personal Exemption. We estimated this figure by multiplying the 2010 personal exemptions taken (est. $900 billion) by 20 percent (the average tax rate paid by individuals) to get $180 billion.

3. Cut More than 100 Welfare Programs that will not Be Needed Under a Big (in millions): As mentioned in chapter 13, some welfare programs will be retained for emergencies. We estimate that we can save $400 billion of the above $461.506 billion. (Note: we did not list the $22.659 billion for Child Tax Credit in the above list, since the BIG—in our proposal—will cover only adults aged 18 and above. Thus, the child tax credit should be retained.)

Appendix Table 2

List of Welfare Programs

Unemployment compensation Food and nutrition assistance Supplemental Security Income Family and other support assistance Earned Income Tax Credit Making Work Pay Credit Payments to states for foster care/adoption assistance Housing assistance and others Veterans’ benefits and services Total Welfare Programs Not Needed Under a BIG

157,011 87,820 43,878 27,566 54,712 13,694 6,972 12,387 57,466 $461,506

Source : All government welfare program figures are from the 2010 Budget of the U.S. Federal Government.

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4. Cut the Defense Budget from its Current $689 Billion Per Year to its 2000 Level of $295 Billion. This is not unreasonable. We can save $394 billion a year by adopting the defense budget of 2000, the final year of the Clinton Administration. It would entail cutting spending on conventional and strategic forces that would not compromise our national security interests or capabilities. Savings would accrue from decreasing routine deployment of U.S. troops overseas, slowing the growth of the Army and Marine Corps as the wars in Iraq and Afghanistan wind down, reducing the fleet size of the U.S. Navy, reducing the number of Air Force squadrons, reducing the strategic capabilities, and canceling outdated cold war weapon systems (including variations of the F-35, MV-22 Osprey, and Expeditionary Fighting Vehicle), among other savings.

Additional Revenues Through Tax Increases (in billions): 1. Reverse Bush tax cuts of 2001 and 2003 = $104 This is a conservative estimate by the Citizens for Tax Justice, a nonprofit tax-research firm in Washington, DC. 2. Go back to the higher income tax rates of 1994 = $30 This estimate is based on the 1994 rates being 2.3 percent to 12 percent higher than 2010 rates. 3. Eliminate separate tax rates; use “single” tax rates only = $60 The single tax rates in 1994 were 1.2 percent to 31.7 percent higher than the “married filing jointly” rates. 4. Add a surcharge of 20 percent to incomes over $1 million = $129 We estimated that this would bring in an extra $129 billion to the Treasury. The IRS reports that the number of income tax returns filed in 2008 with incomes over $1 million was 321,000. The total amount of adjusted gross income in 2008 for incomes over $1 million was $1,076 billion. Thus, $1,076 billion less $321 billion = $755 billion x 17.1 percent (average tax rate paid by millionaires) = $129 billion. (U.S. Statistical Abstract, 2012, page 320, table 488.)

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APPENDIX A

159

5. Extend the 12.4 percent payroll tax to all earned income, not just to those incomes under $106,800 a year = $220 Under current tax law, employers and employees each contribute 6.2 percent of each employee’s annual earnings, up to $106,800, to the Social Security “Trust Fund.” No payroll tax is deducted for annual incomes above $106,800. Thus, millionaires pay only 0.3 percent of their income in payroll tax, while those under $106,800 pay the full 6.2 percent. This proposal would tax all earnings at 6.2 percent for each employee and each employer. According to 2002 IRS data, earnings above the maximum ($90,000 in 2002) totaled $1,771,011,000,000 ($1.7 trillion). Multiplying that by 12.4 percent = $219,605,364,000. 6. Establish a tax of ¼ of one percent (.0025) on all stock transactions = $100 A conservative estimate of $100 billion was calculated by the Policy Institute for Joint Select Committee, October 13, 2011. 7. Institute a 2 percent wealth tax on wealth above $80,000 per individual = $450 In their 1999 book, The Stakeholder Society, Bruce Ackerman and Anne Alstott of Yale Law School calculated this would generate $378 billion a year. Allowing for inflation, such a tax should now generate an estimated $450 billion a year. Their wealth-tax income estimates were constructed by Mark Wilhelm, formerly an assistant professor in the Department of Economics at Penn State University and then at Indiana-Purdue University in Indianapolis. He used data from the Federal Reserve’s 1995 Survey of Consumer Finances (SCF), the most recent and most comprehensive data on wealth available. His revenue estimates assume that the wealth tax would be imposed on net wealth (assets minus liabilities) and that it would include an exemption of $80,000 per individual. 8. Raise the current tax rate on capital gains from 15 percent to 35 percent = $88 This estimate comes from the nonprofit Institute for Policy Studies Program, Washington, DC. Three-quarters of the tax increase would be borne by the richest 1 percent of taxpayers. 9. Hike the estate tax up to 65 percent for estates over $500 million = $7 This conservative estimate comes from the Economic Policy Institute for Joint Select Committee, October 13, 2011. IRS data shows only 0.6 percent of deaths in 2008 resulted in estate

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tax liability. Of the 5500 estates expected to pay any tax under the 2009 rules, only about 100, or 1.8 percent, of those estates will have a majority of their assets in a small business or farm. And of those 100, the vast majority has sufficient cash to pay the tax, according to United for a Fair Economy. A more liberal estimate comes from the Congressional Research Service, which says a 55 percent top rate, with a $1 million exclusion, would affect 1.76 percent of estates and generate $34.4 billion in additional revenue. TOTAL ADDITIONAL REVENUES = $1,188

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A P PE N DI X

B

Current Social Welfare Programs

Social Security The Federal Insurance Contributions Act (FICA) provides for a federal system of old-age, survivors, disability, and hospital insurance. The old-age, survivors, and disability insurance is financed by the Social Security tax. The hospital insurance part is financed by the Medicare tax. Each of these taxes is reported separately. If you’re an employee in private industry, you pay 6.2 percent of your first $106,800 of earnings to the federal government for the Social Security part of the payroll tax. You also pay 1.45 percent of all your earnings for the Medicare part of the tax. Your employer matches your taxes, dollar for dollar, and generally withholds your taxes from your paycheck, sending what’s due to the government periodically. If you’re self-employed, you’ll pay 12.4 percent of your net profit in Social Security taxes up to $106,800 and 2.9 percent in Medicare taxes on all net profit. In 2010, Congress passed a temporary decrease so that the employee tax rate for social security is 4.2 percent withheld. The employer tax remained at 6.2 percent. The Medicare withholding tax was unchanged from 1.45 percent for both employee and employer. For 2012, the maximum tax threshold rises to $110,100. Social Security is the basic retirement system for 90 percent of the nation’s workers. It paid $707 billion in benefits to 55 million persons in 2010. The average monthly payment was $1182. Fifteen percent of recipients were disabled workers. Social Security provides four kinds of benefits: 1. Retirement. Monthly payments are made to former workers. Retirees can get full Social Security benefits at age 66 (for those

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born during 1943–1954) with the threshold gradually rising to age 67 (1960 or later). Early retirees can get reduced benefits at 62. How much you get depends on how much you earned during your working years. Benefits increase automatically as the cost of living rises. If you earn money, some of your Social Security benefits may be taxed. 2. Disability. Monthly payments are made to you if you’re an employee who’s unable to work because of a disability, even if you’re under age 62. 3. Life insurance. At an employee’s death, monthly payments are made to members of the family. 4. Medicare. Medicare provides health care for Social Security recipients. It pays 80 percent of hospital and medical costs. Nearly all people over 65 are enrolled, rich or poor. The cost of administering the Social Security program is about 2 percent of total expenditures. Some politicians claim Social Security is going broke, but, according to the Social Security Administration, it has the ability to pay out every benefit owed to every American for the next 25 years. It is funded by the payroll tax, not by the U.S. Treasury.

Supplemental Security Income (SSI) SSI is a guaranteed income check sent monthly. To be eligible for help from SSI, you have to be over 66 or blind, or permanently or totally disabled. Your current income must be below the maximum benefit level. Some earnings are not counted. Resources cannot exceed a certain level. You must be a citizen of the United States or a lawfully admitted immigrant. There is no work requirement. For a person aged above 66, it’s meant to add to, or “supplement,” the Social Security check, which is often too low to provide even a bare subsistence level of living. Some over-66s don’t receive any Social Security check at all. So the SSI check is their main source of survival. SSI is a combined federal-state program. It’s administered by the Social Security Administration in Washington. Congress sets a minimum amount that each person is guaranteed. Some people get less because they already have other income. Some get more because they live in a state that adds money to the federal payment.

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Federal Employee (Civil Service) Retirement Federal employees don’t pay Social Security taxes. Instead, they and their employer (the federal government) each contribute a percentage of their wages into the Civil Service Retirement plan. Benefits were $120 billion in 2010.

Medicare Medicare provides health care for Social Security recipients. It pays 80 percent of hospital and medical costs. Nearly all people over 66 (going to 67) are enrolled, rich or poor. Medicare provided an estimated $452 billion in benefits in 2010 for millions of aged and disabled people, mainly by reimbursing doctors and hospitals that provided health care to eligible recipients. When you file for Social Security cash benefits, you receive a Medicare health insurance card when you reach age 66. You show it at the hospital or doctor’s office. Americans spend more on health care per person than any other advanced nation but get less for the money. Yearly public and private health care spending is $7,538 per person—more than twice the average of other advanced nations. Yet the typical American lives 77.9 years—less than the average 79.4 years in other advanced nations. And we have the highest rate of infant mortality of all advanced nations. Medical costs are high because administrative costs by insurance companies can run up to 40 percent of premiums. And doctors and hospitals have every incentive to spend on unnecessary tests, drugs, and procedures. Health advocates propose allowing anyone at any age to join Medicare—Medicare for All. Medicare’s administrative costs are in the range of 3 percent. That’s well below the 5 to 10 percent costs borne by large companies that self-insure. It’s even further below the 40 percent administrative costs of individual insurance. Estimates of how much would be saved by extending Medicare to cover the entire population range from $58 billion to $400 billion a year.

Medicaid According to the Census Bureau, 49.9 million Americans (16.3 percent) were without health insurance coverage in 2010. The health

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care crisis would be even worse if it weren’t for the Medicaid program. Medicaid paid $273 billion for medical assistance for 58 million individuals and families—including 29.5 million children and 6.1 million seniors—with low incomes and resources. It is administered by the states and funded by both federal and state governments. Medicaid is larger than any single private health insurer. Medicaid provides long-term care to millions of seniors and critical services that help Americans with disabilities live independently. To qualify for Medicaid, an individual must meet financial criteria, which vary from state to state. In 2010, Federally-funded administrative costs were 3.8 percent of Federal Medicaid spending.

Unemployment Insurance Created in 1935, unemployment compensation provides temporary benefits if you lose your job. Employers pay employees a wage. Then the employer pays a percentage of that wage to the state (and a smaller portion to the federal government) as a payroll tax. The employee pays nothing. The state government puts the money into a fund. The money is used to pay unemployment benefits to people who qualify. To qualify, you must generally prove that you lost your job through no fault of your own. You must be ready to take any suitable job that’s offered. Benefits are available for 26 weeks of unemployment, but Congress can—and often does—authorize Federally financed benefits for up to a maximum of 99 weeks. Shockingly, some state legislatures have simply failed to pass the necessary legislation to enable their citizens to receive these extended benefits paid for entirely by the Federal government. In 2010, the program paid $160 billion in benefits to millions of people and helped lift 3.2 million persons out of poverty.

Earned Income Tax Credit The Earned Income Tax Credit (EITC) is a “refundable” federal income tax credit for low-income working individuals and families. Congress first created the program in 1975, in part to offset the burden of social security payroll taxes. It is designed to “make work pay.” It rewards low-wage work by decreasing the taxes that low-wage workers pay on their earnings and by supplementing their wages. The intent is to move a family with a full-time

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minimum-wage worker above the poverty line, so as to avoid raising children in poverty. The EITC is not a BIG because one has to earn income privately to receive it, but it is a negative income tax in the sense that government pays low-income workers instead of asking them to pay the government. The EITC is a large poverty-reduction program. It lifted 5.4 million people above the poverty line in 2010. For the year 2009, about 26.5 million taxpayers received over $59 billion in EITC benefits. The average net EITC amount was $2,216. However, the IRS estimates that between 20 and 25 percent of eligible taxpayers are not taking advantage of the credit. Every $1 paid out in EITC benefits generates $1.50 to $2.00 in local economic activity. The EITC is fully “refundable.” In other words, if a family owes less in taxes than the listed EITC credit, they get a refund from the government. The credit is gradually phased out on a sliding scale. A family of five gets a maximum tax credit of $5,666 on income from $12,550 to $21,250. Then the credit drops to zero when the family earns $48,362. In 2010, the maximum EITC credit that a single worker with no children could receive was $457 on earnings of $5,950 to $7,500. The credit drops to zero when earnings reach $13,450. Moreover, any single worker who earns $11,139 (the 2010 poverty level for one person) must pay $179 in federal income tax, which essentially cancels out any EITC credit. The IRS estimates that its administrative costs amounted to less than 1 percent of EITC costs.

Child Tax Credit The Child Tax Credit (CTC) is a partially refundable tax credit designed to lessen the impact of income taxes for families raising children. It distributed $23 billion in benefits to 35 million families in 2010 and lifted 2.3 million people from poverty, including 1.3 million children. People with at least one qualifying child who file a federal tax return can get a CTC of up to $1000 for each child under age 17. To qualify for the CTC, the tax filer’s earned income must be at least $3,000 in 2011. Families earning more than $75,000 for single persons and $110,000 for married couples may not claim the credit.

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Since 1998, the CTC has been partially refundable, meaning that even if the worker’s CTC credit is higher than what he or she owes in income tax, the worker can get a partial refund of the difference. Child advocates favor the following: • Permanently lowering the CTC minimum participation income threshold from $3,000 to zero. • Making the CTC fully refundable so those with the lowest income can claim the credit. • Retaining the current $1,000 maximum credit amount.

Temporary Assistance To Needy Families (TANF) President Clinton signed the welfare law in 1996, creating the Temporary Assistance for Needy Families (TANF) block grant to replace the 60-year-old Aid to Families with Dependent Children (AFDC) program. Under the law, states receive fixed federal funding each year in exchange for greater flexibility in using that funding. States set eligibility rules. Federal law requires most recipients to work or go to school. Federal law limits benefits to 5 years: states can raise or lower that. The goal of TANF was to reduce welfare rolls. And it did. Welfare rolls are down 60 percent since 1996. But TANF did not reduce poverty. That’s because it threw recipients into low-paying jobs with no ability to move up. TANF’s early years witnessed unprecedented declines in the number of families receiving cash assistance—and unprecedented increases in the share of single mothers working, especially those with less than a high school education. TANF remains an important source of income support for a small, but vulnerable, group of families. Benefit levels for a family of three averaged $429 per month in 2010. In all but three states, the real (inflation adjusted) value of TANF cash benefits has dropped since 1996. Because the $16.6 billion annual federal TANF block grant was never adjusted for inflation, states receive 28 percent less in real dollars than they did in 1997. Federal and state TANF spending on basic assistance declined from $13.9 billion in 1997 to $9.3 billion in 2009 (TANF stats from Center on Budget and Policy Priorities).

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The declines in the TANF caseload freed up substantial resources that states have used to fund other services. In 2009, states used just 28 percent of TANF funds to provide basic assistance, compared to 71 percent in 1997. TANF benefits are a fraction of the estimated costs of housing for a family. TANF has proven far less effective at lifting families out of deep poverty—that is, incomes below half the poverty line—than AFDC did, mostly because fewer families received TANF benefits than the number that received AFDC benefits. In 2005 (the latest year for which data are available), TANF lifted 650,000 children out of deep poverty—less than one-third of the 2.2 million children that AFDC lifted out of deep poverty a decade earlier.

Food Stamps (SNAP) The Farm Bill that was passed in 2008 renamed the Food Stamp Program. It is now called the Supplemental Nutrition Assistance Program (SNAP). Electronic benefits transfer is now in universal use, so there are no longer any stamps. Benefits are distributed through an electronic benefit (EBT) card, and can only be used for food. The program provided $95 billion to 43 million recipients in 2010 and lifted 3.9 million from poverty. The average monthly benefit was $184. $1.72 in economic gain results from every $1 in SNAP/Food Stamps spent by recipients. Administrative costs were low, with 92 percent of costs going directly to recipients.

Housing Assistance The Department of Housing and Urban Development (HUD) subsidizes housing for low-income people through several programs. The largest federal housing program to assist low-income families is the Section 8 Housing Choice Voucher Program. Low-income families use vouchers to help pay for housing that they find on their own. Eighty percent of vouchers go to households below 30 percent of area median income. It has helped about two million low-income households rent housing in the private market.

Head Start The Head Start program serves more than 900,000 low-income children a year. Head Start has a significant long-term impact: the former

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Head Start participants are significantly less likely than siblings to repeat grades, to be diagnosed with a learning disability, or to suffer the kind of poor health associated with poverty. Head Start alumni were more likely than their siblings to graduate from high school and attend college.

Saver’s Credit The Saver’s Credit is a nonrefundable tax credit of up to $1,000 per person available to low-income individuals and households that contribute to qualified retirement savings plans. The credit reduces one’s tax liability, thus reducing the cost of contributing to a retirement plan. Because lower-income households have little or no tax liability, nonrefundable tax credits are not much benefit to them.

WIC (Special Supplemental Nutrition Program for Women, Infants and Children) WIC provides food, health care, and nutrition education for pregnant women and mothers of children up to the age of five. Eligibility for a family of four: income up to $3,446 per month.

State Child Health Insurance Program This program provides medical care for poor children who are not eligible for Medicaid.

Free Or Reduced-Price Breakfast and Lunch at School Eligibility for family of four: income up to $3,446 per month.

Child Care and Development Fund This program provides free or reduced-cost child care.

Pell Grants This program provides cash for college expenses. No low income requirement, but poorest students receive largest grants.

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Low Income Home Energy Assistance Provides cash for heating and cooling expenses

Weatherization Assistance Program This program provides energy-efficient improvements to low income people.

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A Brief History of a Basic Income Guarantee

A Basic Income Guarantee (BIG) is Not A New Idea The Old Testament talks about compassion toward other people— such as statements by Amos, Micah, Jeremiah, and Isaiah. In the third century, BC, Aristotle and Plato said: “Poverty is the mother of revolution and crime.” The New Testament quotes Jesus in Matthew 25:35: “I was hungry and you gave me food. I was thirsty and you gave me drink. I was a stranger and you took me in.”

Sixteenth to Eighteenth Centuries The idea of a minimum income, guaranteed by a government to all the members of a particular community, appeared at the start of the sixteenth century. Spain’s Johannes Ludovicus Vives (1492–1540) was the first to work out a detailed plan and develop an argument for it, based both on theological and pragmatic grounds. “Even those who have dissipated their fortunes in dissolute living— through gaming, harlots, excessive luxury, gluttony and gambling— should be given food, for no one should die of hunger,” Vives argued. Vives’ statue can still be seen on the bank of one of the main canals in Bruges, Belgium. In 1776, Thomas Jefferson proposed to the Virginia legislature that 50 acres of public land be granted to any propertyless individual willing to farm it. Many states subsequently passed similar laws. Antoine Caritat (1743–1794) was imprisoned and sentenced to death in the French Revolution. While in prison, he wrote the Esquisse

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d’un tableau historique des progres de l’espirit humain (published posthumously by his widow in 1795), which gives a sketch of what a social insurance might look like and how it could reduce inequality, insecurity, and poverty. In 1795, Thomas Paine, in Agrarian Justice, wrote: “We should create in every nation a national fund to pay to every person, when arrived at the age of 21 years, the sum of 15 pounds sterling, to enable him or her to begin the world. And also, 10 pounds sterling per annum during life to every person over the age of 50 years, to enable them to live in old age without wretchedness, and go decently out of the world.”

Nineteenth Century Abraham Lincoln persuaded Congress to pass the National Homestead Act in 1862. Land in the West was given by the government to anyone who agreed to work the land. Homesteads were available in some states until the early 1900s. More than 700,000 families benefited. A quarter of adults today can trace their family legacy of asset ownership to the Homestead Act. In western civilizations, churches were always a traditional source of trying to help the poor. But it was never enough. In the 1840s, Charles Dickens wrote about the grinding poverty and the workhouses of nineteenth-century England. Many societies did not allow poverty. Such as some Native Americans, who set up social structures where people were members of a community and no one starved. Henry George published Progress and Poverty in 1879. He proposed abolishing all income taxes and replacing them with a single tax on land. With “land-value” taxes that confiscate unearned income, he claimed in The Land Question, “There would be at once a large surplus over and above what are now considered the legitimate expenses of government. We could divide this, if we wanted to, among the whole community, share and share alike.” In 1883, Otto von Bismarck implemented old-age pension and health insurance programs for the labor force of Germany. In his 1888 book, Looking Backward, Edward Bellamy imagined Boston in 2000, when everyone’s basic needs are met. More than 160 “Bellamy clubs” were formed in the United States to discuss his ideas and how to implement them. George and Bellamy helped inspire the Populist and Progressive movements that produced the Sherman Antitrust Act and other reforms.

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In 1890, Pope Leo XIII said that “economic life cannot be left to a free competition of forces because competition, while justified and certainly useful if kept within certain limits, clearly cannot direct economic life . . . as this evil individualistic spirit has more than sufficiently demonstrated.”

1901 to 1940 In 1911, Winston Churchill proposed the first unemployment insurance plan in Great Britain and decried giving aid only to the “deserving.” “I am indifferent to the character of the workman,” he said. “It is the duty of society to change the conditions in which he works. Should a workman lose his job through drunkenness, the state should nonetheless pay him his insurance. I do not like mixing up moralities and mathematics.” In 1918, Bertrand Russell strongly supported giving aid without work requirements. “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 finds useful.” Francis Townsend, a family physician in Long Beach, California, suggested in 1933 giving $200 each month to everyone aged 60 or older. In less than 18 months, the “Townsend Plan” movement had nearly 7 million members. Their lobbying played a key role in passing Social Security. Townsend’s original booklet is in the history section of the U.S. Social Security website. In 1934, Louisiana governor Huey Long proposed capping personal fortunes at $50 million each (roughly $600 million in today’s dollars) and giving every family an annual income of $2,000 (or one-third the national average). He called it: “Share Our Wealth.” Before he was assassinated in 1935, his movement attracted nearly 8 million followers. In Technics and Civilization, Lewis Mumford in 1934 examined technology and its social impacts. He argued that the only way to prevent social and economic instability is to guarantee everyone food, shelter, and medical care. But in most advanced nations, there was never much government aid until the 1930s. In the United States, President Roosevelt established job programs like the Civilian Conservation Corps (CCC) and Works Progress Administration (WPA). In 1935, Congress passed Social Security for the elderly and disabled.

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1941 to 1960 In his State of the Union address to Congress on January 11, 1944, and in a fireside chat with the American people the same evening, President Roosevelt proposed a “Second Bill of Rights, under which a new basis of security and prosperity can be established for all.” He argued that “true individual freedom cannot exist without economic security and independence.” He included the rights to a job with a living wage, a decent home, medical care, education, recreation, and freedom from unfair competition and monopolies. In The Road to Serfdom in 1944, Nobel-prize-winning economist Freidrich A. Hayek claimed: “There can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody.” In 1946, amidst the rubble of World War II, the French Constitution declared: “Any individual who, because of his or her age, his or her physical or mental condition, or because of the economic situation, shall find himself or herself unable to work, shall have the right to obtain from the community the means of a decent existence.” That was followed two years later when Article 25 of the Universal Declaration of Human Rights of the United Nations was approved: “Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing, medical care, and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age, or other lack of livelihood in circumstances beyond his control.” The United States signed on. In 1949, the French government confirmed the philosophy of the French Constitution, saying: “Man, from birth to death, has the right to be protected by the community. All of France’s social legislation is dominated by the determination never again to place man in the position of begging.” In 1950, Peter Drucker advocated a “predictable income and employment plan” in The New Society. He proposed we “banish the uncertainty, the dread of the unknown, and the deep feeling of insecurity under which the worker lives today.” Following World War II, most European nations established national health care and social programs to try to limit poverty and homelessness. But, despite the reforms of FDR, 39 million people— 20 percent of the population—still lived below the poverty level in the United States in 1960.

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1961 to 1970 Nobel-prize-winning economist Milton Friedman wrote in 1962 in Capitalism and Freedom, “We should replace the ragbag of specific welfare programs with a single comprehensive program of income supplements in cash—a negative income tax. It would provide an assured minimum to all persons in need, regardless of the reasons for their need.” In a 1963 book, Free Men and Free Markets, Robert Theobald proposed “Basic Economic Security” as an extension of Social Security. He would “break the stranglehold of the job-income link.” In 1964, President Lyndon Johnson declared a “War on Poverty.” People were looking for ideas. In 1967, Martin Luther King Jr. called for a guaranteed income in his famous Riverside Church address, where he also denounced the U.S. government for conducting the Vietnam war. In his book, Where Do We Go From Here: Chaos or Community, he wrote: “I am now convinced that the simplest solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income. A host of positive psychological changes inevitably will result from widespread economic security. The dignity of the individual will flourish when the decisions concerning his life are in his own hands, when he has the assurance that his income is stable and certain, and when he knows that he has the means to seek self-improvement.” In 1968, five noted economists—John Kenneth Galbraith, Harold Watts, James Tobin, Paul Samuelson, and Robert Lampman—called on Congress to “adopt this year a national system of income guarantees and supplements.” Their statement was signed by 1,200 of their colleagues. Galbraith wrote: “A rich country such as the United States must give everybody the assurance of a basic income. This can be afforded and would be a major source of social tranquility. Let us always keep in mind that nothing so denies liberty as a total absence of money.” In 1969, the Johnson-appointed President’s Commission on Income Maintenance Programs—composed of the chairmen of IBM, Westinghouse, and Rand, former California Governor Pat Brown, and 18 others—unanimously recommended that the United States adopt a guaranteed income for every needy American—with no work requirements. The National Council of Churches, by a vote of 107:1, agreed. So did the Kerner Commission, the California Democratic Council, the Republican Ripon Society, and the 1972 Democratic Party platform.

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In 1969, President Richard Nixon proposed his Family Assistance Plan (FAP). It promised an income to needy Americans, but it was watered down with eligibility limits and work requirements in the hope of increasing its political appeal. It passed the House of Representatives, 243:155, on April 15, 1970. But on November 20, 1970, FAP was defeated, 10:6, in the Senate Finance Committee.

1971 to 2000 In his 1972 Presidential campaign, Senator George McGovern proposed giving $1,000 a year to every needy American. In 1974, Congress passed Supplemental Security Income (SSI)— essentially a guaranteed income for people over 65. In 1976, Congress passed the Earned Income Tax Credit (EITC), which gives money in the form of a “refundable tax credit” to lowincome workers. In the state of Alaska, a form of basic income guarantee was adopted in 1980. Called the “Alaska Permanent Fund,” the Fund gets its money from oil royalties from oil drilling on Alaska’s North Slope. In 2010, each resident of the state (for at least a year) received a check for $1,174—men, women, and children. The amount varies from year to year, but has typically been in the range of $1,000 to $2,000 per person. There are no work requirements. The Fund is the closest thing to a basic income that exists in the world today. In 1995, Great Britain passed legislation to establish a trust fund worth at least $400 for each British baby born. The government agreed to make small supplementary payments when the child turns 5, 11, and 16 years old. The account could be worth $7,000 when it matures on the child’s 18th birthday. However, in 2009, David Cameron’s conservative government scrapped the program for new babies.

2001 to 2011 In 2002, a West Virginia court found that the state has a constitutional responsibility to assist the poor, but that this did not have to take the form of cash assistance. In 2003, Secretary of State Colin Powell told Congress he favored an idea to distribute $8 billion of Iraq’s $20 billion in oil revenues directly to Iraq’s 6 million households. It would give every Iraqi adult roughly $1,600, more than half the annual salary of a middleclass worker. Powell said the Bush administration was considering it. A Zogby poll showed nearly 60 percent of Americans supported

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using oil revenues to compensate Iraqi citizens. Paul Bremer, administrator of U.S. policy in Iraq, endorsed it. Leaders of the U.S. occupying force reportedly endorsed the concept, which was also popular with some Kurdish politicians in the north and Shiite Muslim politicians in the south. But the idea shortly disappeared from public discussion. In 2003, the Brazilian National Congress approved the Bill of Law, authored by Senator Eduardo Suplicy and signed by President Luiz Ignacio Lula da Silva, that will create a basic income guarantee in Brazil. The bill began phasing in a basic income in 2005 starting with the most needy. When fully implemented, the basic income will mean that all people, regardless of their origin, race, sex, age, or social and economic status, will have a monetary income enough to meet their basic needs. The bill calls for a subsistence level grant but leaves it to the executive to determine the exact amount of the benefit, with due regard to the state of development of the country and the budgetary capabilities. Brazil has become the first nation in history to grant the unconditional right of subsistence to all inhabitants. In 2004, a South African government task force strongly supported implementation of a basic income of 100 rand (US$10) a month for each person from age 7 to 65. The plan was promoted by a coalition of labor unions, churches, children’s advocates, the elderly, women, and AIDS activists. The government of South Africa has not yet adopted their recommendation. In 2004, the Green Party of the United States adopted a Basic Income Guarantee in its platform. In 2006, San Diego Congressman Bob Filner introduced HR 5257, the Tax Cut for the Rest of Us Act. It was the first basic income bill ever introduced in the U.S. Congress. It would have replaced the standard deduction and personal exemption on the IRS Form 1040 and provide a guaranteed minimum of $2,000 for each adult and $1,000 for each child. But the bill never advanced out of the House Ways and Means Committee. From 2008 to 2010, a two-year basic income pilot program was conducted in Otjivero, Namibia. The money was raised and the program was run by a coalition of labor and church groups. Each of 930 villagers received 1,000 Namibian dollars (US$12.40) each month. The results were positive. Malnutrition rates of children under five fell from 42 percent to zero. Dropout rates at the school fell from 40 percent to almost zero. It led to an increase in small businesses. The group is proposing that the program be adopted nationally.

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What’s in a Name? The Basic Income Guarantee (BIG) is a generic name for many similar programs aimed at providing universal income support. Some of the many different names for specific basic income guarantee proposals include: Alaska Permanent Fund, Basic Income (BI), Basic Income Grant (BIG), Citizens’ Dividend, Citizens’ Income, Daily Bread, Demogrant, Dividends for All, Guaranteed Annual Income (GAI), Guaranteed Adequate Income (GAI), Guaranteed Basic Income, Guaranteed Income (GI), Guaranteed Minimum Income, Guaranteed Minimum, Income Guarantee, Minimum Income Guarantee, Minimum Income, National Minimum, National Tax Rebate, Negative Income Tax (NIT), Refundable Income Tax Credit, Share the Wealth, Social Credit, Social Dividend, Social Income, Social Wage, State Bonus, Territorial Dividend, Unconditional Basic Income (UBI), Universal Allocation, Universal Basic Income (UBI), Universal Benefit, Universal Grant, Universal Income Tax Credit.

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Alternate Forms of a Basic Income Guarantee

There are other Forms of a Basic Income Guarantee 1. Congress could pass legislation to create a computer-normalized income for every resident of the United States. For example, each person under 15 years of age would be allocated one-billionth of the Gross Domestic Product; those from 15 to 60 would receive two-billionths; and those over 60 would receive four-billionths. Our 2011 GDP is $47.5 trillion. In this instance, each person aged 15–60 would receive $23,750 a year. This income would be a constitutionally guaranteed right, not subject to income tax. All employed persons would receive a second income from their employer, subject to income tax. 2. Instead of the minimum basic income being set at the poverty level, it could be set at one-half the median income. Half the incomes in the nation are above the median; half are below. In 2010, the median income was $49,445. Thus, one half would be $24,722. 3. Free consumption of certain commodities. One example is that of bread, then milk and vegetables. Anyone could go into any supermarket and take as much bread as he or she wanted. The government would pay the market for all bread produced. The greedy would at first take more than they could use, but after a short time this “greed consumption” would even itself out and people would take only what they really needed. This method would be just as effective as a basic income guarantee. It would create a new dimension in human life. People would feel freed from the principle of “he who does not work shall not eat.”

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4. We could even go a step further and provide free, not only minimal food needs such as bread, milk, vegetables, and fruit, but minimal clothing and transportation needs as well. In other words, instead of receiving a cash payment as in the basic income guarantee plan, all the necessities of life would be free. This idea is more radical than a basic income guarantee, at least to most. But it could be organized within our current economic system.

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Resources

• The U.S. Basic Income Guarantee Network (USBIG) is an informal association dedicated to promoting the discussion of the Basic Income Guarantee in the United States. Members are academics and activists who support any proposal to create a minimum income level below which no citizen’s income can fall. Founded in 1999, USBIG distributes a quarterly email newsletter, publishes discussion papers on its website, and organizes annual conferences. The 11th annual North American BIG Conference was held in Toronto in May, 2012. Its theme was Putting Equality Back on the Agenda: Basic Income and Other Approaches to Economic Security for All. The conference is a joint effort of the U.S. and Canadian BIG networks. For information, go to www.usbig.net. For links to dozens of BIG websites throughout the world, go to http://www.usbig .net/links.html. For specific information, email karl@widerquist .com. • Basic Income Earth Network (BIEN) is the international voice of BIG. It was founded in 1986 as the Basic Income European Network. It expanded its scope from Europe to the Earth in 2004. It serves as a link between individuals and groups who are committed to or interested in basic income and fosters informed discussion on this topic through the world. BIEN holds a biennial conference on BIG in cities such as Berlin, Geneva, Cape Town, and Dublin. The 13th International Conference of BIEN was held in Sao Paolo, Brazil, in July, 2010. The 14th Congress is set for Ottobrunn (near Munich), Germany, on September 13–16, 2012. A venue has been reserved for up to 500 participants.

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BIEN publishes a quarterly email newsletter. Papers from previous congresses are on its website, and some have been published in books and academic journals. For information, visit www.basicincome.org. • Basic Income News is a new website presenting news and opinion about the basic income guarantee. It is a joint project of BIEN, USBIG, and several other BIEN affiliates. Its goal is to be more up-to-date with news about BIG. BI News is online at www.BInews.org. • Basic Income Studies (BIS) is the first academic journal to focus specifically on basic income. BIS provides a forum for the discussion of theoretical issues and empirical research on the design and implementation of basic income schemes. It also aims to address broader questions regarding the future direction of universal welfare policy. BIS publishes two issues a year, containing peer-reviewed research papers, book reviews, and short commentaries that discuss a central aspect of the debate on basic income and related schemes. Articles are written in clear, nontechnical language. BIS issues are available for free sampling at www.bepress.com/bis. Click the required article and follow the instructions to get free guest access to all BIS publications. • Income Security For All is a nonpartisan, nonprofit center for research and education, exploring the details of BIG ideas. For information, visit www.incomesecurityforall.org.

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A P PE N DI X

F

Suggested Reading

Ackerman, Bruce and Anne Alstott. The Stakeholder Society. Yale University Press, 1999. Ad Hoc Committee on the Triple Revolution. The Triple Revolution. Advertising Age, 1964. Block, Fred. Post-Industrial Possibilities: A Critique of Economic Discourse. University of California, 1990. Clark, Charles M. A. The Basic Income Guarantee: Ensuring Progress and Prosperity in the 21st Century. Liffley Press, 2002. Ehrenreich, Barbara. Nickel and Dimed: On Not Getting By in America. Metropolitan Books, 1991. Friedman, Milton. Capitalism and Freedom. University of Chicago Press, 1962. Fromm, Erich. The Sane Society. Fawcett Publications, 1955. Funiciello, Theresa. Tyranny of Kindness. Atlantic Monthly Press, 1993. Garfinkel, Irwin. Effects of a Tax Rebate on Poverty and Income Distribution. Institute for SocioEconomic Studies Perspective, July 1997. George, Robley. Socioeconomic Democracy: An Advanced Socioeconomic System. Praeger, 2002. Gilder, George. Wealth and Poverty. San Francisco Institute for Contemporary Studies, 1993. Greene, Leonard M. The National Tax Rebate: A New America with Less Government. Regnery Publishing, 1998. Harrington, Michael. The Other America: Poverty in the United States. Penguin Books, 1963; Macmillan & Co., 1997. Hayek, Freidrich A. The Road to Serfdom, 1944. Healy, Sean and Bridget Reynolds. The Future of the Welfare State. Social Justice Ireland, 2010. Johnston, David Cay. Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich—and Cheat Everybody Else. Penguin Group, 2003. Korten, David. When Corporations Rule the World. Harvard Business School, 1995.

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Moynihan, Daniel P. The Politics of a Guaranteed Income: The Nixon Administration and the Family Assistance Plan. Random House, 1973. Mulvale, James P. and Margot Young. The Debate over a Guaranteed Income. The Canadian Centre for Policy Alternatives, 2009. Murray, Charles. In Our Hands, A Plan to Replace the Welfare State. The AEI Press, 2006. Murray, Michael. And Economic Justice for All: Welfare Reform for the 21st Century. M. E. Sharpe, 1997. Neubeck, Kenneth J. When Welfare Disappears: The Case for Economic Human Rights. Routledge, 2006. President’s Commission on Income Maintenance Programs. Poverty Amid Plenty: The American Paradox. 1969. Rifkin, Jeremy. The End of Work. Foundation on Economic Trends, 1995. Shafarman, Steven. Peaceful, Positive Revolution: Economic Security for Every American. Tendril Press, 2008. Sheahen, Allan. Guaranteed Income: The Right to Economic Security. Gain Publications, 1983. Standing, Guy. Beyond the New Paternalism: Basic Security as Equality. Verso, 2002; The Precariat: The New Dangerous Class. Bloomsbury, 2011. Stricker, Frank. Why America Lost the War on Poverty—And How to Win It. University of North Carolina Press, 2007. Suplicy, Senator Eduardo Matarazzo. Citizen’s Basic Income: The Answer is Blowing in the Wind. Porto Elegre, 2006. Theobald, Robert. The Guaranteed Income: Next Step in Socioeconomic Evolution? Doubleday & Co., 1966. Van Parijs, Philippe. Real Freedom for All: What (if Anything) Can Justify Capitalism. Oxford, Clarendon Press, 1995. Van Parijs, Philippe. “Delivering a Basic Income.” Boston Review, 2000. Widerquist, Karl. Freedom as the Power to Say No. USBIG Discussion Series, 2004. Wogamon, Phillip. Guaranteed Annual Income: The Moral Issues. Abington Press, 1968. Wright, Erik Olin. Envisioning Real Utopias. Verso, 2010. Zinn, Howard. A People’s History of the United States. HarperCollins, 1995.

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No tes

1

Introduction: It’s Time to Think BIG

1. Bertrand Russell, Roads to Freedom: Socialism, Anarchism, and Syndicalism (London: Unwin Books, 1966, first published in 1918). 2

So What’s the BIG Idea?

1. See Appendix C for a complete list of names for programs similar to BIG. 4

Did You Know?

1. All poverty data is from the U.S. Census Bureau Annual Report, September 2011. In the early 1960s, economist Mollie Orshansky of the Social Security Administration developed a definition of the poverty line. If a family made less than three times what the Agriculture Department estimated it would cost to feed it, it was poor. Embraced by the Johnson Administration when it launched its War on Poverty, Ms. Orshansky’s definition has remained the standard, despite objections from both the right and left. Conservatives say that, among other things, the definition overstates food inflation and excludes things like food stamps, while liberals say it understates costs such as taking care of children and getting to work. The threshold differs, depending on the size and makeup of a household. In November, 2011, the Census Bureau issued a Supplemental Poverty Report. Citing high housing prices—especially in the West—it estimated 49.1 million people lived in poverty, not 46.2 million. Food costs have dropped to one-seventh of household payouts, while other expenses—taxes, medical out-of-pocket payments, commuting costs, and child care—now eat up a much larger share of expenses. 2. Homeless estimates come from the U.S. Department of Human Development (HUD), which estimates 672,000 were homeless in July 2008. The National Coalition for the Homeless (NCH) estimates as many as 820,000 were homeless at any one time.

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NOTES

3. Center for American Progress, 2011. 4. Second Harvest, the nation’s largest domestic hunger-relief organization. 5. Center on Budget and Policy Priorities, November 2011. 5

Why Are Jobs Not the Answer?

1. Nouriel Roubini, Project Syndicate, October, 2011. 2. Unemployment figures from Bureau of Labor Statistics. 6 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17.

18.

19. 20. 21. 22. 23. 24. 25. 26.

Why Is There So Much Inequality in the United States?

Time Magazine, October 24, 2011. The Hill, a Washington, DC, newspaper, November 2011. Forbes Magazine, in its annual review of America’s richest 400, 2011. Congressional Budget Office. Ibid. Ibid. Internal Revenue Service (IRS). Congressional Budget Office. Citizens for Tax Justice, Washington, DC. Ibid. IRS. Dollars and Sense Magazine. Congressional Budget Office. U.S. Census Bureau, November 7, 2011. Time Magazine, November 14, 2011. Institute for Policy Studies Program. IRS (During seven of the eight George W. Bush years, the IRS report on the top 400 taxpayers was labeled a state secret, a policy that the Obama administration overturned almost instantly after his inauguration). Jacob Hacker, professor of political science at Yale; and Paul Pierson, professor of political science at UC Berkeley; authors of Winner-TakeAll Politics: How Washington Made the Rich Richer—and Turned its Back on the Middle Class. Institute for Policy Studies. United for a Fair Economy, Boston, Mass. Ibid. Citizens for Tax Justice, Washington, DC. Ibid. Ray Madoff, professor at Boston College Law School, Los Angeles Times, July 6, 2010. Center on Budget and Policy Priorities. Based on 2010 tax rates for a single individual before deducting the personal exemption of $3650 and standard deduction of $5700. The

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NOTES

45. 46.

tax on $60,000 earnings after taking these deductions would be $8850 (14.7 percent), $7598 (12.7 percent), and $0, respectively. A temporary payroll tax cut of 2 percent was adopted by Congress in 2009 and is still in force. This will also change to a limited degree under a provision of the health care reform law enacted in 2010. The 2.9 percent Medicare tax will be increased to 3.8 percent for highincome people and will, in effect, apply to most investment income as well as wages, starting in 2013. The bulk of the payroll tax, the 12.4 percent Social Security tax, will continue to be capped at $106,800 of wages that an individual earns (2010). (This cap traditionally rises annually with wage growth.) The employer also pays 7.65 percent. Time Magazine, October 24, 2011. Warren E. Buffett, “Stop Coddling the Super Rich,” New York Times, August 14, 2011. Seth Hanlon, Director of Fiscal Reform, Center for American Progress, Washington, DC. Ibid. Tax Policy Center, Washington, DC. Citizens for Tax Justice and the Institute on Taxation and Economic Policy, November 3, 2011. Ibid. Edward D. Kleinbard, Rich Man Whining, August 24, 2011. Institute on Taxation and Economic Policy. Leonard Burman and Greg Lieserson, “Two-Thirds of Tax Units Pay More Payroll Tax than Income Tax,” Tax Policy Center, April 9, 2007. George H. W. Bush made this remark several times in presidential campaign speeches in the Republican primary in 1979. Former senator Alan Simpson, cochair of President Obama’s deficitreduction commission. Ron Brownstein, senior writer at the National Journal, Los Angeles Times, July 15, 2011. IRS. Office of Management and Budget, Historical Tables, Table 1.3. Prior to 1976, the U.S. fiscal year ran from July 1 to June 30. In 1977, it changed to run from October 1 to September 30. So there was a three-month period (July 1, 1976 to September 30, 1976) where U.S. budget figures were totaled separately. Institute on Taxation and Economic Policy (ITEP). Ibid.

7

How Do Other Countries Handle Economic Security?

27.

28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44.

1. Citizens for Tax Justice, September 8, 2009. 2. Organization for Economic Cooperation and Development (OECD).

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3. German data from author David Cay Johnston, columnist for tax. com and teacher of the tax, property, and regulatory law of the ancient world at Syracuse University College of Law, April 13, 2011. 9

Is a Basic Income Guarantee Moral?

1. The ad was noted by Philip Wogaman in Guaranteed Annual Income: The Moral Issues (Abingdon Press, 1968). 10

Why Should I Work to Support Welfare Chiselers?

1. Nicholas Kisburg, longtime lobbyist for the International Brotherhood of Teamsters in New York and a sharp critic of the city’s welfare system in the 1960s and 1970s, Speech in New York City, 1969. 2. Melvin J. Lerner, Professor of Social Psychology at the University of Waterloo between 1970 and 1994 and now a visiting scholar at Florida Atlantic University, The Belief in a Just World: A Fundamental Delusion, Critical Issues in Social Justice (Springer Publishing, September 30, 1980). 11

Why Not Guarantee Everyone a Job?

1. James Bovard, libertarian author and lecturer, Attention Deficit Democracy (New York: Palgrave Macmillan, 2006). 12 1. 2. 3. 4. 5. 6.

U.S. Census Bureau, 2010 Poverty Report, September 2011. U.S. Department of Agriculture. U.S. Census Bureau, 2010 Poverty Report, September 2011. Ibid. Center on Budget and Policy Priorities. Second Harvest, the nation’s largest domestic hunger-relief organization. 13

1. 2. 3. 4. 5.

Why Not Try Other Programs?

Can the United States Afford a Basic Income Guarantee?

Citizens for Tax Justice, Washington, DC. See Appendix A. See Appendix A. See Appendix A. See Appendix A. The payroll tax could eventually be eliminated as Social Security is blended into the BIG program.

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189

6. Daniel Morans, Policy & Legislative Associate for Social Security Works, and economic Policy Institute for Joint Select Committee, October 13, 2011. 7. Institute for Policy Studies Program, Washington, DC. 8. Citizens for Tax Justice, Washington, DC. 9. Economic Policy Institute for Joint Select Committee, October 13, 2011. 10. United for a Fair Economy, Boston, MA. 11. U.S. Budget, Fiscal Year 2010. 12. Internal Revenue Service. 13. Ibid. 14. Ibid. 15. Ibid. 14

Will a Basic Income Guarantee Work?

1. Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962). 2. Los Angeles Times telephone poll of 1681 adults nationwide, I. A. Lewis, Director, April 1981. Margin of error: 4 percent either way. 3. Maslow’s five-point value hierarchy was noted by Robert Townsend in Up the Organization (New York: Alfred A. Knopf, 1970). 15

Has the Basic Income Guarantee Ever Been Tested?

1. Widerquist, Karl, A Failure to Communicate: What If Anything Can We Learn from the Negative Income Tax Experiments; Essay for U.S. BIG Conference, NY, 2002. Sheahen, Allan, Guaranteed Income: The Right to Economic Security (Van Nuys, CA: GAIN Publications, 1983). 2. Office of Income Security Policy, U.S. Department of Health and Human Services, Overview of the Seattle-Denver Income Maintenance Experiment, Final Report (Washington, DC: U.S. Government Printing Office, 1983). 3. Robins, P. K. “A Comparison of the Labor Supply Findings from the Four Negative Income Tax Experiments.” Journal of Human Resources 20, 4 (1985), 567–582. 4. Levine, et al. A Retrospective on the Negative Income Tax Experiments. 5. Widerquist, Karl, A Failure to Communicate. 6. The four NIT experiments were: a. The New Jersey Graduated Work Incentive Experiment. New Jersey and Pennsylvania, 1968–1972. Sample: 1216 (original); 983 (final). Sample characteristics: black, white, and Latino, twoparent families in urban areas with a male head aged 18–58 and income below 150 percent of poverty line.

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NOTES

b. The Rural Income-Maintenance Experiment (RIME). Iowa and North Carolina, 1970–1972. Sample: 809 (original); 729 (final). Both two-parent families and female-headed households in rural areas with income below 150 percent of poverty line. c. The Seattle-Denver Income-Maintenance Experiments (SIME/ DIME). Seattle and Denver, 1970–1976 (some continued to 1980). Sample: 4879. Black, white, and Latino families with at least one dependant and incomes below $11,000 for single parents, $13,000 for two-parent families. d. The Gary, Indiana Experiment. Gary, Indiana, 1971–1974. Sample: 1799 (original); 967 (final). Black households, primarily female-headed, head aged 18–58, income below 240 percent of poverty line. 16

What about the Work Ethic?

1. In Guaranteed Annual Income: The Moral Issues (New York: Abingdon Press, 1968), Philip Wogaman detailed the narrow and broad definitions of work and leisure. 17

What Will Life Be Like under a Basic Income Guarantee?

1. Los Angeles Times poll, March 1981, of 1,681 adults nationwide. 19

How Is a Basic Income Guarantee Administered?

1. Robert S. McNamara, President of Ford Motor Co. (1950–1961), U.S. Secretary of Defense (1961–1968), President of the World Bank (1968–1981), One Hundred Countries; Two Billion People: The Dimensions of Development (New York: Praeger Publishers, 1973). 20

What’s Happening with BIG around the World?

1. Evelyn L. Forget, The Town with No Poverty: The Health Effects of a Canadian Guaranteed Annual Income Field Experiment, September 2011, 283–305. 22

Realistically, What Are the Chances for a BIG in the United States?

1. Roosevelt’s January 11 address was delivered via radio. During the last portion dealing with the Second Bill of Rights, he asked news cameras to come in and begin filming. This footage was believed lost

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191

until it was uncovered in 2008 in South Carolina by Michael Moore while researching for the film: Capitalism: A Love Story. The complete list of rights is as follows: • The right to a useful and remunerative job in the industries or shops or farms or mines of the nation. • The right to earn enough to provide adequate food and clothing and recreation. • The right of every farmer to raise and sell his products at a return that will give him and his family a decent living. • The right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies at home or abroad. • The right of every family to a decent home. • The right to adequate medical care and the opportunity to achieve and enjoy good health. • The right to adequate protection from the economic fears of old age, sickness, accident, and unemployment. • The right to a good education.

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Inde x

Aaron, Henry, 110 Ackerman, Bruce, 89, 159 Adams, John, 101 “Additional Child Tax Credit” (CTC), 16, 81, 91, 157; as refundable tax credit, 86, 147, 151, 165–166 adjusted gross income (AGI), 41, 158 Adler, Moshe, 93 administration: of BIG, 86 , 97, 127–132; of EITC, 165; of Medicare/Medicaid, 163–164; of SNAP, 167; of Social Security, 82 , 162; of SSI, 162; of welfare programs, 11, 57, 82 , 88, 164, 167 AFDC. See Aid to Families with Dependent Children (AFDC) Affluent Society, The (Galbraith), 39 Agrarian Justice (Paine), 5, 172 Aid to Families with Dependent Children (AFDC), 10, 81, 166, 167 Alaska Permanent Fund, 87, 95, 137; support for, 93, 133–134. See also natural resources Allen, Woody, 143 Alstott, Anne, 89, 159 Annie Hall (film), 143 Argentina, 40 Aristotle, 5, 171 Aronowitz, Stanley, xiii Attention Deficit Democracy (Bovard), 76 Australia, 50, 51, 52, 95

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Austria, 50, 51, 134 automation, 20, 23, 25, 27, 122; in Europe, 119; menial jobs and, 118, 119. See also productivity “baby bonds,” 81, 176 bailouts, 34, 115 banks/bank accounts, 34, 53, 86, 98, 128, 129 Basic Income Earth Network (BIEN) Conference, 134, 181–182 Basic Income Guarantee (BIG), 3–6, 7, 178, 179–180; abuse of, 98, 116; administration of, 86, 97, 127–132; eligibility for, 95, 127–129; morality of, 61–65; opinion of in U.S., 1–2, 141–146; partial funding for, 3, 149, 151; state supplements to, 130; as threat to democracy, 1, 121–125; U.S. adoption of, 147–152. See also funding of BIG Basic Income News (website), 182 Basic Income Studies (BIS) (academic journal), 182 Belgium, 50, 51, 134, 171 Bellamy, Edward, 115, 172 Berlusconi, Silvio, 53 Bettelheim, Bruno, 68 Bible, the, 5, 21, 61, 146, 171 BIG. See Basic Income Guarantee (BIG) Bill of Rights, 141–142; Roosevelt’s proposal for Second, 149–150, 174, 191n1 blacks, 13, 14, 110, 142

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194

INDEX

Blair, Tony, 81 block grants, 10, 81, 82, 166 Boeing corporation, 33 Boteach, Melissa, 17 Bovard, James, 76 Brazil, 40, 134–135, 177, 181 break-even point, 90–91, 128 Bremer, Paul, 177 Britain. See Great Britain Brown, Jerry, 118 Brown, Pat, 175 Browne, Harry, 77 Brynjolfsson, Erik, 25 Buffett, Warren, 31, 36–37, 129 “Buffett Rule,” 36–37 bureaucracy, 123, 129, 142, 151; job training and, 76; of welfare programs, 57, 130 Bush, George H. W., 40, 41, 43, 44, 176, 187n39; reversing tax cuts made by, 88, 92, 94, 158 Bush, George W., 44, 186n17 Business Week magazine, 38 Cain, Herman, 21, 67 California Democratic Council, 8, 175 Cameron, David, 81, 176 Canada, 50, 51, 52, 94, 134, 139–140 capital gains, 36, 45, 94; funding BIG by raising tax rate on, 89, 92, 159; tax cuts on, 35, 37, 93 Capitalism: A Love Story (film), 191n1 Capitalism and Freedom (Friedman), 117, 142–143, 151, 175 Caritat, Antoine, 171–172 Carson, Johnny, 101 Carter, Jimmy, 9, 43, 72, 150 cash payments (transfers), 9, 15–16, 180 Center for American Progress, 17 Center for Responsive Politics, 32 Challenge to Affluence (Myrdal), 49 cheating on BIG, 98, 116

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Child Care and Development Fund, 168 children: amount of BIG for, 129; child care and, 49, 52; hunger and, 17; inclusion of into BIG, 85–86, 129; NIT experiments and, 108; in poverty, 13–14, 15, 20, 52; upward mobility and, 23; welfare mothers and, 74. See also families Child Tax Credit (CTC), 16, 81, 91, 157; as refundable tax credit, 86, 147, 151, 165–166 Chile, 50, 51 China, 24, 105, 145 Churchill, Winston, 6, 125, 173 Citizens for Tax Justice, 158 Citizen’s Income Trust, 139 Civilian Conservation Corps (CCC), 6, 28, 73, 173 Civil Rights Act (1964), 82 Civil Service Retirement plan, 163 class: class conflict, 37–38, 104– 105; middle class, 31, 34, 52; upper class, 52 Clinton, Bill, 41, 43, 44, 158, 166 Clinton, Hillary, 81 community service/volunteerism, 62, 75, 99, 102; in retirement, 101; work ethic and, 113 compassion, 52–53, 64–65, 67, 70, 142 Comprehensive Employee Training Act (CETA) (1973), 73, 76 computer-normalized income, 179 Congress, U.S., 32, 124, 145–146; ”Buffett Rule” and, 37; education funding by, 144; EITC and, 80–81, 164, 176; guaranteed jobs and, 72; payroll tax and, 187n27; Social Security taxes and, 161; SSI and, 162, 176; unemployment insurance and, 164; welfare programs and, 74 Congressional Research Service, 160 conservatives, 9, 73, 142–143

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INDEX

Constitution, U.S., 121, 124, 141– 142; Second Bill of Rights and, 149–150, 174, 191n1 CORI Justice Commission, 139 corporations, 33; guaranteed jobs and, 71; tax subsidies for, 38 cost of BIG. See funding of BIG cost of living, 129 crime, 5, 29, 53, 58, 119, 138, 171 CTC. See ”Additional Child Tax Credit” (CTC) Czech Republic, 50, 51 Declaration of Independence, 141–142 . See also Constitution, U.S. defense budget, 82, 90; funding BIG by cutting, 88, 92, 153, 158 democracy, 31; BIG as threat to, 1, 121–125 Democratic Party Platform, 8, 143, 175 Democrats, 31 Denmark, 22, 49, 50, 51, 134 Department of Housing and Urban Development (HUD), 167, 185n2 dependency/independence, 115–116 de Villepin, Dominique, 136 Diary of Anne Frank, The (Frank), 104 Dickens, Charles, 6, 10, 172 disability, 20, 80, 161, 162 divorce, 110–111, 130 “double taxation,” 37 Douglas, William O., 11 Drucker, Peter, 174 Earned Income Tax Credit (EITC), 57, 80–81, 91, 157, 164–165, 176; BIG as replacement for, 81, 88, 130; as refundable tax credit, 10–11, 16, 151 economic growth, 131; income tax and, 41–43; ”trickle-down” theory and, 39, 40–44

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195

Economic Policy for a Free Society (Simon), 41 Economic Policy Institute, 159 economic recessions, 20, 130–131 economic rights, 58 economic security, 1, 3, 29, 56, 58, 151; in advanced nations, 49–53; changes resulting from, 8, 175; Roosevelt on, 121, 150, 174 Economics for the Rest of Us (Adler), 93 education: in European nations, 52; GI Bill and, 101, 156; global poverty and, 144; Pell Grants and, 168–169; poverty cycle and, 22–23; rights to, 59; tax loopholes and, 155. See also job training Edwards, John, 24, 150 efficiency, 24–25, 100, 117, 119. See also automation; productivity EFG Hermes (Middle East investment bank), 53 Eisenhower, Dwight D., 40, 90, 93 EITC. See Earned Income Tax Credit (EITC) elderly, 14, 20. See also retirement; Social Security eligibility. See means testing employment. See jobs/employment Endnotes are referred to by page, the letter n, followed by the note number. England. See Great Britain Esquisse d’un tableau historique des progres de l’esprit humain (Caritat), 171–172 estate tax, 34, 89, 90, 91, 92, 159–160 Estonia, 50 European nations, 6, 47, 49, 135, 174; housing costs in, 52, 94; Marshall Plan and, 144; work committees in, 118–119. See also under specific nation

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196

INDEX

Exploring the Alaska Model: How the Permanent Fund Dividend Can Be Adapted as a Reform Model for the World (Howard and Widerquist), 133 Fairness in Taxation Act (2011), 93 “fair tax,” 46, 147–148 families, 49; AFDC and, 10, 81, 166, 167; divorce and, 110–111, 130; EITC and, 80–81; FAP and, 8–9, 37, 92, 147, 148, 151, 176; NIT experiments and, 108–109; TANF and, 10, 15, 16, 81, 82, 166–167; WIC and, 168. See also children family allowances, 49, 81 Family Assistance Plan (FAP), 8–9, 148, 151, 176; FAP debates, 37, 92, 147 Farm Bill (2008), 79, 167 federal deficit, 39, 40, 89–90, 92, 93 federal employees, 73–76, 163 Federal Insurance Contributions Act (FICA) (2011), 161 Federal Reserve, 159 Feldstein, Martin, 94 Filner, Bob, 148, 177 Financial Times magazine, 53 Finland, 50, 51, 134 Fitzgerald, F. Scott, 47 “flat tax,” 46, 93 food stamps, 14, 15, 16, 57, 79, 167; BIG as replacement for, 56, 130; creation of program of, 10; insufficiency of, 19, 68; Orshansky definition of poverty and, 185n1 Forbes Magazine, 32 Ford, Gerald, 43, 72 Forget, Evelyn, 140 France, 13, 50, 51, 53, 136, 174 Frank, Anne, 104 Free Men and Free Markets (Theobald), 175 French Constitution, 50, 53, 174

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Friedman, Milton, xiii, 7, 142– 143, 150, 151; on efficiency, 100, 117; on welfare programs, 88, 175 Fromm, Erich, xiii, 8, 55, 58–59, 103 full employment, 11, 20, 72 funding of BIG, 85–95; by adding surcharge to high incomes, 89, 92, 158; by cutting defense budget, 88, 92, 153, 158; by eliminating standard deduction/ personal exemption from tax code, 88, 92, 157; by eliminating tax loopholes, 5, 85, 87–88, 92, 93–94, 95, 149, 153–156; by eliminating unneeded welfare programs, 88, 92; by extending payroll tax, 89, 91–92, 159; by increasing taxes, 88, 92, 158; by instituting wealth tax, 89, 92, 159; partial, 3, 149, 151; by raising estate tax rate, 89, 92, 159–160; by raising tax on capital gains, 89, 92, 159; by simplifying tax code, 89, 92, 158; state supplements to, 130; by taxing stock transactions, 89, 92, 159. See also Basic Income Guarantee (BIG) Funiciello, Theresa, xiii Galbraith, John Kenneth, 7, 39, 175 Gary, Indiana Negative Income Tax Experiment, 108, 109, 191n6 GDP. See Gross Domestic Product (GDP) General Electric (GE), 33 George, Henry, 93, 172 Germany, 68, 104, 134, 135, 136, 181; GDP spending in, 50; tax revenues percentage of GDP in, 51, 52; von Bismacrk and, 6, 172 GI Bill, 101, 156 Gilder, George, 71

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INDEX

Great Britain, 22, 81, 82, 139, 176; Churchill and, 6, 125, 173; Dickens and, 6, 10, 172; ”Speenhamland” System in, 111; taxes in, 50, 51, 52, 53 Great Gatsby, The (Fitzgerald), 47 Great Transformation, The (Polanyi), 111 Greece, 50, 51 Greene, Leonard, xiii Green Party, 177 Greider, William, 39 Gross Domestic Product (GDP), 114; of other advanced nations, 50–51, 52; of U.S., 40, 50, 51, 85, 179 Guaranteed Annual Income: The Moral Issues (Wogaman), 65, 190n1 Guaranteed Income, The (Theobald), 59, 97, 99–100, 120, 142 guaranteed income movement: debates about in 1970s, 1, 92; policy agenda on in 1960s, 7; positive effects of, 10–11 guaranteed jobs, 71–77 Hamases, Bertha, 138 Hammerstein, Oscar, II, 104 Hammond, Jay, 133 Hayek, Freidrich A., 7, 174 Head Start, 14, 167–168 health care, 90, 91, 95, 172; in advanced nations, 49, 52, 58; basic right to, 59; global poverty and, 144; state-funded, 168; tax breaks for employer-sponsored, 94; tax loopholes and, 156. See also Medicaid; Medicare Healy, Sean, xiii, 139 Heikal, Hassan, 53 Heritage Foundation, 17 Hill, Steven, 53 hiring, 20, 45, 73, 83, 119 Hispanics, 13, 110 Hitler, Adolf, 68

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197

Hollande, François, 53 Hollings, Ernest, 121–122 home energy assistance, 169 homelessness, 2, 10, 14, 17, 185n2; in Europe, 6, 174; welfare-towork programs and, 25 Homestead Act (1862), 172 House Ways and Means Committee, 148, 177 housing assistance, 16, 49, 91, 154, 157, 167; Universal Declaration of Human Rights and, 174 housing costs, 16, 154, 185n1; in Canada, 94; in Europe, 52, 94; mortgages and, 34–35, 87, 94; subsidies for, 34; TANF and, 167 Howard, Michael, xiii, 133 Howe, Irving, 79 HR 5257 (“Tax Cut for the Rest of Us” Act), 148, 177 human nature, 28, 104–105, 141–142, 151; HR 5257 and, 148. See also laziness human services, 26–27 Humphrey-Hawkins Bill (1973), 72 Hungary, 50, 51 hunger. See starvation/hunger, threat of IBM, 24, 25, 175 Iceland, 50, 51 illegal aliens, 118, 128 immigration, 128 incentives: to serve society, 62, 77, 97; to work under BIG, 97, 98–105 income: funding BIG and, 89, 92, 158; ”in-kind,” 15, 16; on investments, 36–37, 46, 187n27; median, 179; from property, 115, 171; redistribution of, 143; through work, 26, 27–28; unreported, 17 income disparity (“income gap”), 31–38, 40, 143, 150. See also wealth disparity (“wealth gap”)

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198

INDEX

Income Security For All (nonprofit), 182 income tax, 41–43, 86; funding BIG and, 5, 89, 91; paid by people in poverty, 17–18 India, 24, 40, 134, 135, 137 individualism, 64–65 inflation, 72, 89, 131, 159n7, 166, 185; fear of, 2, 68; minimum wage and, 80; Reaganomics and, 39; wealth gap and, 34 inheritance, 63, 115 “in-kind” benefits, 15, 16 In Our Hands (Murray), 7, 150–151 Institute for Policy Studies Program, 159 Institute on Taxation and Economic Policy (ITEP), 46 Internal Revenue Service (IRS), 33, 86, 128, 129, 153–158; AGI and, 41; EITC and, 165; funding BIG and, 87, 89, 94 investment income, 36–37, 46, 187n27 Iowa-North Carolina Negative Income Tax Experiment (RIME), 108, 109, 191n6 Iran, 137 Iraq, 137, 176–177 Ireland, 50, 51, 134, 139 Irish Liberal Party, 139 Israel, 50, 51 Italy, 50, 51, 53, 134, 139 Jackson, Jesse, Jr., 148 Jantti, Markus, 22 Japan, 25, 50, 51, 52, 134, 135, 136 Jefferson, Thomas, 171 Jesus Christ, 33, 61, 146, 171 Jews, 69 job creation, 24–25, 26, 44, 45, 57, 73; Clinton tax increases and, 41; by Obama, 73; SNAP and, 79

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jobs/employment, 19–29; automation and, 20, 23, 25, 27, 118, 119, 122; creation of, 24–25, 26, 41, 44, 45, 57, 73, 74, 79; efficiency and, 24–25; fear of losing, 55–56; full employment and, 11, 20, 72; government as employer and, 73–76, 163; guaranteeing, 71–77; hiring and, 20, 45, 73, 83, 119; human services and, 26–27; incentive to work under BIG and, 97, 98–105; income through, 26, 27–28; layoffs and, 34, 45, 100; manufacturing, 24–25; menial, 118–119; minimum wage and, 11, 24, 71, 80–81, 118, 165; moving overseas, 20, 24–25; NIT experiments and, 107–111, 140, 189n16; recessions and, 20; satisfaction in, 102; socially useful, 62, 77, 97, 119–120; subsidies and, 73; welfare-towork programs and, 23–24, 25; work as self-identity and, 100–101; work committees in Europe and, 118–119; work ethic and, 2, 62–63, 67, 68, 100, 113–116. See also under unemployment job training, 16; in European nations, 52; governmentmandated, 74–75, 76–77 Johnson, Lyndon, 7, 8, 175, 185n1 justice, 68–69 Kaplan, Roy, 99 Kennedy, John F., 70 Kennedy, Robert, 143 Kennedy, Ted, 145 Kerner Commission, 8, 175 King, Martin Luther, Jr., 8, 175 Kisburg, Nicholas, 68 Korea, 50, 51, 134, 139 Kucinich, Dennis, 73, 151–152 Kuwait, 136

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INDEX

Lampman, Robert, 175 land, taxing, 93, 172 land/property rights, 171 Land Question, The (George), 172 Larner, Jeremy, 79 layoffs, 45, 100 laziness, 2, 62–63, 67–68, 69, 100, 102–103; vs. work ethic, 2, 62–63, 67, 68, 100, 113–116. See also human nature Leo XIII (pope), 6, 173 Lerner, Melvin, 68–69 Levi Strauss, 24 Lewis, Michael, xiii liberals, 9, 73, 143 Lincoln, Abraham, 128, 172 Long, Huey, 6, 173 Long, Russell, 9, 37, 92 Looking Backward (Bellamy), 115, 172 Los Angeles Times, 102 lottery winners, 99 Lula da Silva, Luiz Ignacio, 134, 177 Luxembourg, 50, 51 Maclaine, Shirley, 105 manufacturing jobs, 24–25 marriage, NIT experiments and, 110–111 Marshall Plan, 144 maternity benefits, 49 McAfee, Andrew, 25 McGovern, George, 1, 36, 176 McMahon, Ed, 101 McNamara, Robert S., 132 means testing, 86, 115–116, 127–129; Alaska Permanent Fund and, 87, 95, 133; Social Security and, 129 median income, 179 Medicaid, 16, 82, 91, 163–164 Medicare, 14, 16, 45, 95, 163; payroll taxes and, 36, 91, 161–162, 187n27 men, NIT experiments and, 108–109

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199

Menezes, Arul, 45 menial jobs, 118–119 Mexico, 24, 50, 51 microfinancing, 144 middle class, 31, 34, 52 migration to cities, 57, 129–130 military spending. See defense budget minimum wage, 11, 24, 71, 80–81, 118, 165 Mitterrand, François, 114 Mongolia, 136–137 Moore, Michael, 35, 191n1 morality of BIG, 61–65 mortgages, 34–35, 87, 94 Moynihan, Daniel, xiii, 2, 9, 73, 147 Mumford, Lewis, 173 Murray, Charles, 7, 150–151 Murray, Michael, xiii Myrdal, Gunnar, 49 Nader, Ralph, 90 Namibia, 134, 135, 138, 177 National Association of Social Workers, 9 National Council of Churches, 8, 175 National Welfare Rights Organization, 9 natural resources, 93, 133, 136–137, 144, 154. See also Alaska Permanent Fund Negative Income Tax (NIT), 3–4, 7, 142–143; EITC and, 165; experiments of, 107–111, 140, 189n16 New Jersey-Pennsylvania Negative Income Tax Experiment, 108, 109, 190n6 New Life in Later Years, A (Wolterek), 102 New Society, The (Drucker), 174 New York Times, 36 New Zealand, 50, 51 Nigeria, 135 NIT. See Negative Income Tax (NIT)

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200

INDEX

Nixon, Richard, 8, 43, 72, 176 Noguchi, Eri, xiii nonrefundable tax credits, 168. See also refundable tax credits North American BIG Conference, 134, 181 Norway, 49, 50, 51 Obama, Barack, 36, 38, 73, 186n17 Occupy movement, 31–32 O’Donnell, Lawrence, 128 Organization for Economic Cooperation and Development, 50–51 Orshansky, Mollie, 185n1 O’Sullivan, Dan, xiii outsourcing jobs, 20, 24–25 Paine, Thomas, 5, 172 payroll taxes, 36–39, 161–162, 187n27; EITC and, 80, 164; funding BIG and, 89, 91–92, 159; unemployment compensation and, 164. See also taxes Peaceful, Positive Resolution (Shafarman), 3, 62, 119 Pell Grants, 168–169 pensions, 15; in European nations, 49, 52. See also retirement; Social Security permanent residents, 3 personal exemptions, 88, 92, 157, 186n26 Plato, 5, 29, 171 Poland, 50, 51 Polanyi, Karl, 111 Policy Institute for Joint Select Committee, 159 Politics of a Guaranteed Income, The (Moynihan), 73 population, U.S. See poverty, number of people in; unemployment rate Portugal, 50, 51 poverty, 25–26; blame and, 2, 21–22; children in, 13–14, 15, 20, 52; cycle of, 20, 21, 22–23, 56; effects

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of, 28–29, 95; global, 143–145; income tax and, 17–18; number of people in, 1960, 6; number of people in, 1969, 8, 20; number of people in, 1970s, 20; number of people in, 2010, 13–14, 16, 20–21, 56; severe, 116; TANF and, 10; as unpopular political issue, 150; War on, 7–11, 20, 175, 185n1 Poverty, Views from the Left (Howe and Larner), 79 poverty level: basic subsistence and, 3, 15; cost of living and, 129; EU official, 135; vs. median income, 179; Orshansky definition of, 185n1; in 2010, 4, 13, 14, 86 Powell, Colin, 137, 176 Precariat: The New Dangerous Class, The (Standing), 19 President’s Commission on Income Maintenance Programs, 1, 22, 26, 71, 73, 75–76; recommendation of, 8, 175 Press, Bill, 95 prison/prisoners, 87, 95, 115, 120, 171 private charities, 14, 19, 82 productivity, 14, 25–26, 27, 131; as adequate to support BIG, 95, 144; efficiency and, 24–25, 100, 117, 119; under Reagan, 39; ”Speenhamland” System and, 111. See also automation Program for Better Jobs and Income (Carter proposal), 9, 150 Progress and Poverty (George), 93, 172 Progressives, 172 progressive taxation, 4, 40, 46, 143 property income, 115, 171 Psychology Today magazine, 68 public assistance. See welfare programs race, 13, 14, 110, 142 Race Against the Machine (Brynjolfsson and McAfee), 25 railroad retirement benefits, 15

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INDEX

Rasmussen polls, 150 Reagan, Ronald, 2, 39, 43, 44, 94, 95 Reaganomics, 39 Real Freedom for All (Parijs), 123 recessions, 20, 130–131 ReCivitas (Brazilian nonprofit), 135 Rector, Robert, 17 refundable tax credits, 4–5, 15–16, 127; CTC and, 86, 147, 151, 165–166; nonrefundable tax credits and, 168; ”Tax Cut for the Rest of Us” Act and, 148, 177. See also Earned Income Tax Credit (EITC) Reich, Robert, 44 Republican Ripon Society, 8, 175 Republicans, 31 retirement, 99, 101, 115; Civil Service plan for, 163; pension and, 15, 49, 52; tax loopholes and, 156. See also Social Security Reynolds, Bridget, 139 Rhys-Williams, Juliet, 63 rights: basic human, 55, 58, 61–65, 75, 97; Bill of Rights and, 141–142; in Constitution, 121, 124, 141–142, 149; economic, 58; to education, 59; to health care, 59; to jobs, 72; Second Bill of Rights and, 149–150, 174, 191n1; universal, 61, 98, 174 Roads to Freedom: Socialism, Anarchism, and Syndicalism (Russell), 1 Road to Serfdom, The (Hayek), 174 Roosevelt, Franklin D., 6, 70, 121, 149–150, 173–174, 190n1 Roosevelt, Theodore, 39 Rural Income-Maintenance Experiment (RIME), 108, 109, 191n6 Russell, Bertrand, 1, 173 Samuelson, Paul, 175 Sanders, Bernie, 15 Sane Society, The (Fromm), 55, 103 Saver’s Credit, 168

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201

Scandinavia, 52, 53; Denmark, 22, 49, 50, 51, 134; Finland, 50, 51, 134; Norway, 49, 50, 51; Sweden, 13, 49, 50, 51 Schakowsky, Jan, 93 school lunches, 168 Seattle-Denver Negative Income Tax Experiment (SIME/DIME), 107, 108–109, 110, 191n6 Second Bill of Rights, 149–150, 174, 191n1 Section 8 Housing Choice Voucher Program, 167 Segal, Hugh, 139 Senate, U.S., 9, 56, 72, 121–122, 176 Shafarman, Steven, xiii, 3, 62, 119, 124, 127 Sheahen, Mary, 67 Simon, Herbert, 7, 40, 41 Singapore, 138 Slovak Republic, 50 Slovenia, 50, 51 small businesses, 44, 76, 89, 156, 160; in Namibia, 138, 177 Smith, Manuel J., 98 SNAP (Supplemental Nutrition Assistance Program). See food stamps socialism, 123–124 Social Policy Association Conference, 139 social projects, 83. See also welfare programs Social Security, 2, 14, 128, 161–162; administration of, 82, 162; BIG as replacement for, 4, 56, 80, 88; inception of, 6; low payments in, 19; means testing and, 129; Medicare and, 163; official poverty figures and, 15; opponents of original proposal of, 100; payroll tax and, 187n27; retirees over age 77 in, 115; support for, 4; tax loopholes and, 156 social welfare. See under welfare

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202

INDEX

Something to Look Forward To (Rhys-Williams), 63 soup kitchens, 2, 10, 14, 17 South Africa, 134, 135, 177 South Pacific (musical), 104 Soviet Union, 145 Spain, 50, 51, 171 Specter, Arlen, 46 “Speenhamland” System, 111 Spiegelman, Robert, 110 SSI. See Supplemental Security Income (SSI) Stakeholder Society, The (Ackerman and Alstott), 89, 159 standard deductions, 88, 92, 157, 186n26 Standing, Guy, xiii, 19, 137 starvation/hunger, threat of, 2, 55, 56, 58, 118, 122; BIG as end to, 95; children and, 17; cost of, 14; defense budget and, 90; global, 52, 138, 144; private charities and, 82 states, 18, 168, 171; Alaska, 87, 93, 95, 133–134, 137; federal funding to, 10, 166; responsibilities of, 176; rights of, 82; SSI and, 162–163; TANF and, 10, 81, 82, 166–167; unemployment insurance and, 80, 164; welfare and, 2, 82, 108 step-up-at-death loophole, 94, 154 stimulus packages, 73 Stockman, David, 39, 89 stock market, 89, 92, 94, 115, 159; stability of, 131 stock transaction tax, 89, 92, 159 subsidies, 34, 73, 114–115 subsistence-level BIG, 3, 15 Suplicy, Eduardo, xiii, 134, 139, 177 Supplemental Nutrition Assistance Program (SNAP). See food stamps Supplemental Security Income (SSI), 15–16, 88, 91, 157, 162–163, 176; inception of, 10 supply-side economics, 39

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Survey of Consumer Finances (SCF) (Federal Reserve), 159 Sweden, 13, 49, 50, 51 Switzerland, 49, 50, 51, 138 Taft, Robert, 56 Talmud, 146 TANF. See Temporary Assistance to Needy Families (TANF) tax code: personal exemption from, 88, 92, 157, 186n26; simplification of, 89, 92, 158; standard deduction from, 88, 92, 157, 186n26 “Tax Cut for the Rest of Us” Act (HR 5257), 148, 177 taxes, 32, 38–39; in advanced nations, 49–53; ”Buffett Rule” and, 36–37; Bush administration cuts of (2001–2003), 40, 41, 43, 44, 88, 92, 94, 158, 176, 187n39; ”class warfare” and, 37–38; cuts on capital gains, 35, 37, 93; ”double taxation” and, 37; earnings and wages and, 35–36; employer-sponsored health care and, 94; estate tax, 34, 89, 90, 91, 92, 159–160; ”fair tax,” 46, 147–148; ”flat tax,” 46, 93; funding BIG by increasing, 88, 89, 92, 158, 159–160; income disparity and, 31–38; progressive, 4, 40, 46, 143; reversing Bush administration cuts of, 88, 92, 94, 158; on stock transactions, 89, 92, 159; Value Added, 47. See also payroll taxes tax loopholes (“expenditures”), 34; elimination of, 5, 85, 87–88, 92, 93–94, 95, 149, 153–156 Technics and Civilization (Mumford), 173 technology, 24–25 Temporary Assistance to Needy Families (TANF), 10, 15, 16, 81, 82, 166–167

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INDEX

the 1 percent, 32, 33 The Hill (newspaper), 95 the Netherlands, 49, 50, 51, 134 Theobald, Robert, xiii, 8, 59, 97, 99–100, 120, 142, 175 Time magazine, 36 Tobin, James, 7, 175 Tolstoy, Leo, 141 Townsend, Francis, 173 Townsend, Robert, 113 “trickle-down” economics, 39, 40–44 Triple Revolution memorandum, 28 Turkey, 50, 51 unemployment, 22, 25–26, 98, 117–118 unemployment compensation/ insurance, 14, 15–16, 19, 68, 91, 164; BIG as replacement for, 4, 56, 157; increasing, 80; in pre-WWI Europe, 100; state vs. federal administration of, 82. See also jobs/employment unemployment rate: 1955–1970, 40; 1980s, 2; 1981–2010, 40; 2010, 23 United for a Fair Economy, 160 United Kingdom, 94, 134, 139; Ireland, 50, 51, 134, 139. See also Great Britain United Nations, 174 United States, 24–25, 32; chances for BIG adoption in, 147–152; changing public opinion of BIG in, 141–146; federal deficit of, 39, 40, 89–90, 92, 93; GDP of, 40, 50, 51, 85, 179; health care in, 95; net worth of, 2011, 85; vs. other advanced nations, 49–53 Universal Declaration of Human Rights of the United Nations, 174 universal right to life, 61, 98, 174 upper class, 52 Up the Organization (Townsend), 113 upward mobility, 23, 56

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203

USA Today, 32 U.S. Basic Income Guarantee Network (USBIG), 181, 182 U.S. budget, 157, 187n44; balancing, 2, 39, 68; defense budget, 82, 88, 90, 92, 153, 158; deficit of, 39, 40, 89–90, 92, 93 U.S. Census Bureau, 13, 16, 87, 163, 185n1 U.S. Department of Agriculture, 17, 185n1 U.S. Department of Housing and Urban Development (HUD), 167, 185n2 U.S. National Academy of Sciences, 144 U.S. Treasury, 162 Value Added Tax (VAT), 47 Van Niekirk, Ingrid, xiii Van Parijs, Philippe, xiii, 123, 139 veterans: benefits and services for, 157; tax loopholes and, 156 veterans’ compensation, 15 Villers, Phillippe, 45 violence, 119 Vives, Johannes Ludovicus, 171 volunteerism. See community service/volunteerism von Bismarck, Otto, 6, 172 Wal-Mart, 24 War and Peace (Tolstoy), 141 Warner and Swasey Company, 64 War on Poverty, 7–11, 20, 175, 185n1 Warren, Elizabeth, 28 “Watson” (IBM computer), 25 Watts, Harold, 175 wealth: taxes on, 89, 92, 94. See also poverty Wealth and Poverty (Gilder), 71 wealth disparity (“wealth gap”), 7, 32, 34, 56, 143, 150. See also income disparity (“income gap”)

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204

INDEX

welfare chiselers, 1, 2, 63, 67–70 welfare mothers, 74 welfare programs, 14, 23–24, 25, 57, 83; administration of, 11, 57, 82, 88, 164, 167; in advanced nations, 49–53; BIG as replacement for, 4, 56, 85, 86, 94, 130, 157; class conflict and, 104–105; cutting of to fund BIG, 88, 92; eligibility for, 74, 115–116; Friedman on, 88, 175; means testing for, 115–116; in 1930s, 28; Program for Better Jobs and Income as replacement for, 9, 150; reform on, 9, 10; states and, 2, 82, 108; TANF and, 10, 15, 16, 81, 82, 166–167 welfare-to-work programs, 23–24, 25 West, Cornel, 18 We the People: Healing Our Democracy and Saving Our World (Shafarman), 124, 127 When I Say No, I Feel Guilty (Smith), 98 Where Do We Go From Here: Chaos or Community (King Jr.), 175 Whitehouse, Sheldon, 37 whites, 13, 110 WIC (Women, Infants, and Children), 168 Widerquist, Karl, xiii, 133 Wilhelm, Mark, 159

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Williams, Joan, 38 Wogaman, Philip, xiii, 8, 64–65, 190n1 Wolterek, Heinz, 102 women, 13, 168; NIT experiments and, 108–109 Women, Infants, and Children (WIC), 168 work. See jobs/employment work ethic, 2 , 62– 63 , 67, 68 , 100 , 113–116 ; under BIG, 98–105; vs. laziness, 2 , 62– 63 , 67– 68 , 69, 100 , 102–103; poverty and, 75 Workforce Investment Act (1998), 73, 76 Workman’s Compensation, 15 Works of John Adams, Second President of the United States, The (Charles Francis Adams), 101 Works Progress Administration (WPA), 6, 28, 73, 173 world poverty, 143–145 You Can Get There From Here (Maclaine), 105 Young, Whitney M., Jr., 61, 85 You’ve Got to Be Taught (Hammerstein II), 104 Zelleke, Almaz, xiii Zogby polls, 137, 176–177 Zuccotti Park (New York City), 31

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