How to Fix Poverty: Write Every Family a Basic Income Check

By Betsy Isaacson, Newsweek

23 December 14

n the United States—as in all of the world’s wealthier nations—ending poverty is not a matter of resources. Many economists, including Timothy Smeeding of the University of Wisconsin (and former director of the Institute for Research on Poverty) have argued that every developed nation has the financial wherewithal to eradicate poverty. In large part this is because post-industrial productivity has reached the point where to suggest a deficit in resources is laughably disingenuous. And despite the occasional political grandstanding against welfare, there is no policy, ideology or political party that is on the books as pro-starvation, pro-homelessness, pro-death or anti-dignity.

Yet, poverty continues to exist. In the U.S., for example, almost 15 percent of citizens (and almost 20 percent of children) live in poverty. Of those, slightly under 2 percent live on less than $2 per person per day.

The main problem is logistical. The current U.S. welfare systems take in trillions of dollars and provide fairly little utility on a dollar-for-dollar basis. There’s unhappiness on both sides of the political aisle—conservatives harrumph about “welfare queens” and liberals complain about the expensive drug testing required to collect welfare checks, for example. Welfare as it exists today is fragmented to the point of making effective oversight impossible, mired in red tape and inconsistent between cities, states and the federal government. And because of that, in the richest nation in the world, people starve.

But there may be a solution. Some might see it as radical, but advocates, both libertarian and liberal, are suggesting straight up cash: a guaranteed subsidy to everyone. "We've got to a technological level now where no one needs to work the traditional 40-hour week," says Barbara Jacobson, chair of Unconditional Basic Income–Europe, an alliance of European citizens and organizations that advocate for such subsidies. But while productivity per hour across developing nations has increased dramatically since the 1970s, “this has not meant a rise in wages, or a fall in hours without a pay cut,” says Jacobson. And on top of that, she adds, there is a significant amount of “crucial work, generally caring work, which isn't paid for, but without which society would collapse.” The people doing this type of work—parenting and elder care, for example—often end up broke; if you are a single parent, it’s often not feasible to hold a traditional, wage-paying job while also taking care of three kids and your mother who has Alzheimer’s.

A simple cash subsidy—$15,000 per year (which is about what the average retiree gets annually from Social Security) for every household, say—would give the poor and middle class a financial floor on which they could live, take care of their loved ones and maybe, says Jacobson, "think about what really needs doing, what they would like to do, what they have trained to do, as opposed to simply what someone might hire them to do."

It makes financial sense for the cash-strapped U.S. government. In 2012, the federal government spent $786 billion on Social Security and $94 billion on unemployment. Additionally, federal and state governments together spent $1 trillion on welfare of the food stamp variety. Adding those costs together, that's $1.88 trillion. This number shows no signs of falling—in fact, the number of people seeking social services each year is increasing, as is the rate of homelessness, and as the baby boomer generation ages, more and more will need the support of Social Security.

In switching over to a universal basic income, the books will not only stay balanced—they might even move into the black. According to the U.S. Census Bureau, there are 115,227,000 households in the U.S. Split $1.88 trillion among all these households and each one gets $16,315.62. In other words, if you turned the welfare system into a $15,000 basic income payment, you’d end up saving over $150 billion (or $1,315.62 per American household).

The basic proposal can be tweaked, of course, so that the system makes a bit more sense. Households making over $100,000 per year probably get by just fine on their own. Cut them out of the equation, and you would end up with a $20,000 basic income check for the remaining households, while still netting the government some nice savings.

Despite the pleasingly round back-of-the-napkin math, replacing food stamps and other artifacts of America’s welfare system with no-strings-attached cash isn’t that easy. There’s the small matter, for example, of stitching together all of the patchwork social program providers—federal, state and local governments—and getting them to agree to all put in to one kitty. It’s also controversial. Pascal-Emmanuel Gobry, a columnist for The Week, worries that if we gave everyone basic incomes to cover their necessities, it might encourage a mass exodus from the workforce as people no longer “need” to work to survive. And the fear that some kind of basic income might tank the economy by allowing “freeloaders” is hardly a new apprehension: Richard Nixon’s Family Assistance Plan, which proposed a modest basic income of $1,600 per family (plus $800 in food stamps) was opposed by conservatives in 1970 because it lacked work requirements; once those were added, the left, fearing the requirements were too onerous, opposed the bill. Nixon’s Family Assistance Plan never passed.

But analysis of pilot programs in which basic income was provided to communities in the U.S. and Canada suggest that it plays out differently than opponents suggest. In those programs, the overall reduction in working hours among those given basic income was extremely low. And the only participants who stopped working fit neatly into one of two distinct demographics: new mothers, and teenagers who had previously been working while attending high school—neither of which are representative of the broader population

Matt Zwolinski, founder of Bleeding Heart Libertarians, thinks basic income would be no worse than the current welfare state, which often stops providing benefits when recipients become employed. “As a result,” he says, “poor families often find that working more (or having a second adult work) simply doesn’t pay.” Zwolinski believes libertarians and small-government conservatives should be fighting to replace welfare with a basic income guarantee, which would shrink the government and promote personal independence—two tenets of their political beliefs.

Other opponents of a basic income argue we should expand the current welfare system, which provides necessary services to those in need. “We already provide, for example, universal elementary and secondary education because that is something we feel everybody should have," says Barbara Bergmann, an economist and trustee of Economists for Peace and Security, a New York–based nongovernmental organization. According to Bergmann, food, shelter, college education and child care should also be provided by the government. "If the government were going to spend large amounts of money, there are better things to spend it on than universal cash."

But Michael Howard, coordinator of the U.S. Basic Income Guarantee Network, believes that in the age of automation, basic income or something like it could become a necessity. “We may find ourselves going into the future with fewer jobs for everybody,” he says. “So as a society, we need to think about partially decoupling income from employment.”

Despite tentative bipartisan support for basic income in the U.S, the concept has gained greatest traction outside America. Switzerland has become the first country to hold a referendum on basic income at a national level; in 2015, the Swiss Parliament will vote on whether to extend a basic income of 2,500 Swiss francs (about $2,600) per month to every Swiss resident. In India, meanwhile, after the success of a 20-village pilot program in Madhya Pradesh, a state in central India, the federal government of India announced in 2013 it was moving to replace 29 aid programs with direct cash transfers.

But even in the U.S, basic income has a forebear. In Alaska, the state’s oil revenues are divided equally between every resident. The checks written at the end of the year usually amount to somewhere around $1,000 per person, hardly enough for a household to live on, but the subsidy does seem to positively affect Alaskans: economist Scott Goldsmith calculated that this is the equivalent to adding an entire new industry, or 10,000 new jobs, to the Alaskan economy. The model boasts nearly a 90 percent approval rating and a slew of fierce political advocates, including those, like Alaska’s former Republican Governor Wally Hickel, who see it as a blueprint for a new, superior economic policy. “From common ownership of our land and our resources, has emerged a new model for modern society,” he said in 2009. “We call ourselves the Owner State. And what we own is the commons. We believe our model surpasses both capitalism and socialism.”

December 15, 2014: A previous version of this article incorrectly stated that the Swiss Parliament will be voting on a basic income of 2,500 Swiss francs per year. They will actually be voting on a basic income of 2,500 Swiss francs per month. It also stated that Wally Hickel spoke about the "Owner State" in 2012. He actually made the statement in 2009.