Free Money for All: A Basic Income Solution for 21st Century Problems
By Mark Walker
Chapter 1: BIG
1.0 Introductory
Imagine this: you are an anthropologist leading a team to investigate reports there are human fossils in Antarctica. On the way there, in order to avoid a menacing cyclone, the ship’s captain deviates from the planned route into less traveled waters. The detour is to your great fortune. You have stumbled onto the find of a lifetime: an unknown population on a remote south pacific island. After checking several data bases just to be sure, you confirm that the pre-modern indigenous population has almost certainly had no contact with the rest of the world for centuries, perhaps millennia. Although professional and international treaties prohibit you from brazenly making first contact, your team consults with UN officials via radio and is given permission to study the tribe from afar—so long as you remain undetected.
Each member of your team is assigned to observe several individuals of the tribe with binoculars and telescopes. You are tasked with observing four males. Peering through your telescope you quickly notice that two appear to be well-fed and enjoy elaborate shelters. Their dwellings seem to provide ample protection from the remnants of the cyclone still pelleting rain. Your other two subjects appear to be malnourished. At night they sleep exposed to the rain and the wind. As far as you can tell, they have no shelter to call their own. You are astonished. You are well aware that there is anthropological evidence of some material inequality amongst members of pre-modern tribes (Smith et al. 2010); still, you are astounded by the extreme level of inequality in this tribe. It is not as if the tribe as a whole is short on food or shelter. Indeed, as a whole, the tribe actually has a vast surplus of food: much seems to get wasted. Furthermore, your team confirms that there are enough shelters such that everyone could be sheltered. Your two materially well-off subjects actually appear to own several homes, meaning that some huts go unused every evening. Your team tries to puzzle this out. Why not simply let those exposed to the elements (including your two subjects) use the huts that no one else is using? As professional anthropologists, your group was taught long ago that the term “primitive culture” is colonialist and ethnocentric. Still, this and similar terms slip out during your team discussion as you ponder some hard questions: What conventions of the distribution of material goods could justify such remarkable differences in access to material necessity? How can some be forced to sleep outside in the elements, short on food, while others live in material opulence? It is both puzzling and exciting that this pre-modern tribe differs from so many others studied by anthropologists. Good fortunate has smiled upon you, your career is made.
You return to the U.S. to much fanfare. You do a number of interviews about your remarkable discovery of the pre-modern tribe and do the late night talk show circuit. All the attention is exciting but you are glad when the hubbub dies down. You return with relief to your home town, Anywhere, U.S.A, to resume your teaching and research.
You and your spouse plan a nice dinner out to celebrate the return to normalcy. You pull up to the restaurant just in time to witness this scene: Two very expensive cars, known for their “fine German engineering” and worth three times the average U.S. salary, pull up just down the street from you. Their well-dressed owners exchange some good-natured ribbing about the short-comings of each other’s vehicle as they enter the most expensive restaurant in town. On the same street, two homeless persons beg for change. One holds up a sign indicating that he is a U.S. veteran down on his luck. You wonder if it is colonialist and ethnocentric to describe your own culture as “primitive”.
Of course this thought experiment is a bit forced and unrealistic. As intimated, pre-modern societies typically never approach anywhere near the material inequality suggested in the thought experiment. Such a discovery really would be remarkable. On the other hand, the part of the thought experiment where two homeless persons sharing a public street with two owners of fine German engineering is not the least bit unrealistic. We have all seen homeless people living on our streets; we have all seen pictures of the rich with their private planes, their private yachts, their private estates, and their private country clubs. The question of this work is whether such disparities can be justified.
From the point of view of capitalism, the scene from Main St., Anywhere Town is a triumph of distributive justice. The capitalist market rewards the talented and hardworking while it fails to reward the untalented and the lazy. The capitalist vantage says our expensive car owners almost certainly must be hardworking and talented; our homeless persons must be untalented, lazy or perhaps both. If it is just a matter of luck, well, some are lucky and some are not.
Yet for many of us, the scene is incredible. How can these four persons on this stretch of public road all be citizens of one and the same community of persons? Perhaps some differences in wealth are justified, but what could possibly justify such an extreme inconsistency of wealth? From this vantage point, the scene seems almost surreal. But what is to be done about it? Socialism, many think, has failed. So it seems we are left with capitalism.
1.1 A Middle Course?
A policy that looks to steer a possible middle road between socialism and capitalism stems from an idea that has waxed and waned for some time: a Basic Income Guarantee (or BIG for short). The name explains much; the idea is to guarantee every citizen in the country an unconditional income sufficient to meet some minimal threshold. BIG and related proposals have a long history often traced back at least to Thomas Paine’s Agrarian Justice (1796), sometimes as far back as the bible.[1]
On the face of it, BIG sounds like a compromise. It would not be anywhere near the level of economic equality sought by many egalitarians and socialists, yet it would do much to stem the worst excesses of unrestrained capitalism. It would, for example, help the economic situation of the homeless veteran and his downtrodden compatriot in our example.
This work deals primarily with the United States and argues for a BIG of $10,000 USD. In other words, the aim is to support the conclusion that every citizen of the U.S. should receive $10,000 with no conditions attached. It is unconditional in the sense that both rich and poor alike should receive it, with no work requirement. So, unlike the current welfare policy, BIG would not be conditional on being employable or looking for work. The perennial Malibu surfer, who has never worked a day in his life, would be as much entitled to his BIG as the 80 hours a week workaholic.[2]
Why should the perennial surfer be entitled to a guaranteed income?[3] I admit this is a good question and one to which much of this work is devoted. Before outlining the arguments in favor, it will help us to first get a better idea of exactly what BIG is.
The proposed BIG of $10,000 would be paid directly by the Internal Revenue Service once a month. So, each month, every citizen of the U.S. would receive 1/12th of their $10,000 per annum, or $833 per month, payment as a direct deposit into his or her account. As indicated, this same amount would go into the account of the richest citizens, including Bill Gates and Warren Buffet, as well as our surfer.
Most discussions of BIG shy away from providing a precise dollar amount. I can certainly see the reasons for this reticence. Often the point is to discuss the theoretical pros and cons of BIG and not get bogged down on the details. I have decided (perhaps unwisely) to go against this trend. My thought in doing so is to prove that BIG is perfectly feasible. In other words, the intention is to show that BIG is not some utopian dream but rather a policy we could easily adopt. The danger is that in putting a hard number out there, I risk alienating some of those who might otherwise be friendly to the suggestion. Some may wish for a larger BIG, others for a smaller amount.
It would be a mistake to think that the word ‘basic’ in BIG will settle the issue of an appropriate amount. One potential problem in stating an amount stems from the vagueness and ambiguity of the word ‘basic’. What exactly does it mean? In one sense it might mean the bare minimum to avoid dying of starvation or exposure. In that sense perhaps $10,000 per annum is far too much. Nine people might be able to share the rent on a bachelor apartment, perhaps three to a bed, sleeping in shifts. Eating noodles and peanut butter sandwiches for many meals might help keep the food bill down. Perhaps living right on the edge like this, someone might survive on $5,000 a year in parts of the U.S.
On the other hand, one might think that ‘basic’ means something like “minimally decent”. On this understanding, an income must be sufficient to live on one’s own or at least not require bunking with eight others in a bachelor apartment, and still have enough for a cell phone, Internet, TV, a clothing allowance and so on. Perhaps the income level in that case might be more like $15,000 per year. Even with these two senses of ‘basic’ there is a certain amount of vagueness: does the having ‘enough to eat’ mean eating until one is full or having just enough calories to survive? And on the more expansive understanding we might wonder whether Internet access means high speed cable or a slower dialup connection. Does TV access include some of the cable packages with educational channels? And so on.
Invoking the “poverty line” doesn’t help much either.[4] The same problems reappear. What counts as ‘poverty’? Surely starving for lack of food does, but should people have enough for a high-speed Internet connection, and so on? Even the U.S. federal government can’t decide upon a poverty line. They offer two different numbers: poverty threshold and poverty guidelines.[5] Both are between 11 to $12,000 per year, per person. So, someone living on BIG as their sole source of income would live below the poverty threshold or guideline. Still this doesn’t give us much idea whether BIG is enough without knowing the details of what is involved in calculating the poverty threshold or guideline.
More helpful is the living wage calculator on the Massachusetts Institute of Technology website as part of their “Poverty in America” resources. In part, the living wage calculator on the website is designed to show the minimal costs to live in selected areas. Below are data for two different locations: Las Cruces and New York City.
Table 1. Living Wage Calculator[6]
Las Cruces / New YorkFood / $242 / $242
Child Care / $0 / $0
Medical / $137 / $136
Housing / $479 / $1,129
Transportation / $285 / $262
Other / $69 / $104
Required monthly income after taxes / $1,212 / $1,873
Required annual income after taxes / $14,544 / $22,476
Annual taxes / $2,355 / $4,045
Required annual income before taxes / $16,899 / $26,521
The first thing to notice is that the living wage calculator puts BIG well below a living wage in both places. The lion’s share of the difference between the Las Cruces and New York costs is housing, $479 versus $1,129 respectively. We will talk more about this difference in the next section, but for the moment we will concentrate on the Las Cruces numbers. BIG is not taxed, so we can see immediately that the appropriate comparison is the after tax amount. This still leaves a deficit of $4,544 in terms of annual income, or $379 per month. (The Living Wage calculator comes to $1,212 per month while a $10,000 annual BIG payment works out to $833 per month). One thing that could be pared down from the Living Wage calculator is transportation. A bus pass in Las Cruces costs $30 a month, so this would shave off $255 a month, bringing the gap to $124 a month. Note I am not saying that the Living Wage calculator is wrong in having transportation at that amount. Their calculation is based on the idea that someone is working for a living. For many jobs it would be impossible to take a bus to work in a timely fashion. Since we are working on the idea that someone is trying to live off of BIG as a sole source of income, the cost of transportation to work is not an issue. One of the sacrifices would be the time and convenience associated with faster modes of transportation, such as a personal vehicle or taxi rides. Another savings under the present proposal is a universal health care system (see the next chapter) that would eliminate most of the $137 a month in medical bills. Further savings can come from shared accommodation. It is possible to rent a three bedroom place in this area starting at $500 a month. Utilities (gas, electricity, water and Internet) might work out to somewhere around $150 to about $320 a month, resulting in a savings from the Living Wage budget of $159 a month, more than enough to cover the aforementioned gap.
Here’s another example. In consulting on this issue, I’ve turned to experts; I've asked students in my classes how much they live on. I don’t say that to be facetious but I live in southern New Mexico, one of the most impoverished areas in the U.S. Many students at my university are first-generation university students from lower income families. Here is some of what I have found. At New Mexico State University, you can live in a triple occupancy dorm for $1,196 per semester and have unlimited food for $1,673 per semester. At a per annum rate this works out to $8,607. Triple occupancy in a small room is pretty harsh I admit. However, it includes cable/internet and unlimited hot water. The food bill includes restaurant-type meals as many times a day as one wishes. The meals are from a large cafeteria/smorgasbordtype of set up. The reason that many students in my classes say that they do not live in the dorms is that it is too expensive. Students find off campus housing in shared houses/apartmentsthat give them more space, with cooking facilities that reduce their expenses. My point is that many college students manage to eke out a living on $10,000 a year. Indeed some, including some of my students, would find this amount to be positively opulent compared to what they are forced to live on at the moment.