Actually, a Universal Basic Income Will Solve Poverty

Eduardo Porter’s “Why a Universal Basic Income Will Not Solve Poverty” contains many common misperceptions about basic income that it’s important to clear up.

The first misperception is in the unfortunate title attached to his essay. A basic income would in fact eliminate poverty if set at a level high enough to do so, which Mr. Porter himself acknowledges. This is true by definition, of course, but worth pointing out, since no other U.S. social policy implemented since poverty was officially defined in the 1960s has been able to durably lower the poverty rate below 15%.

The second misperception is that basic income is unaffordable. It’s true that basic income is expensive, but calling it unaffordable short-circuits the discussion we should be having about the costs and benefits of a basic income. Raising taxes is never an easy sell, but might it be worth it if the additional revenues were spent on a program guaranteed to eliminate poverty?

This leads to the third misperception, which is that a basic income could be financed by replacing current social spending with a flat check to all. Mr. Porter is right to point out that doing so would redistribute income upward, which is exactly the goal of Charles Murray’s plan–not a basic income at all, but a thinly veiled attempt not only to dismantle the safety net but also to privatize Social Security.

The only basic income that makes any sense, and is affordable, is one that is financed through higher taxes–on income, wealth, estates, or some combination of the three. If the basic income is financed through progressive taxes, its net cost decreases from the scary math of $10,000 times the population. By how much? It depends on how much we’re willing to tax.

Thinking seriously about a basic income means coming to terms with the “r” word–redistribution. If we were willing to acknowledge the need for redistribution in a country in which more than 20% of children live in families with incomes under an outdated and inadequate poverty line, then we could debate whether a basic income makes more or less sense than subsidized jobs, subsidized wages, or something else.

If we had that debate, we could consider whether a basic income might actually encourage work if recipients could keep the full benefit as they earned wages–which no current anti-poverty program, including the EITC, allows; whether cash rather than in-kind benefits (like food stamps and housing subsidies) might enable the unemployed to move to where there are jobs, better schools, or safer communities; and whether a steady stream of unconditional income might incentivize investment in the training and education that will be required for the higher-skill jobs of the future.

As Mr. Porter notes, more income for the working class is not only more equitable, but would provide a boost to the economy, since people at the lower end of the income scale spend a higher proportion of their money. Basic income is not the only way to get more money into their hands, but it does so without the poverty traps and disincentive effects of our current anti-poverty measures–the ones that have kept millions of citizens in the richest country in the world stranded in poverty.

Reparations and a Basic Income

Like Thomas Piketty’s Capitalism in the Twenty-first Century, Ta-Nehisi Coates’ “The Case for Reparations” in the June 2014 Atlantic provides support for the case for a basic income. Coates does not mention a basic income, nor does he propose any particular remedy for the economic injuries endured by African-Americans. His focus is on demonstrating how discrimination and predatory practices in the housing market in particular kept African-Americans from participating in the housing-based asset accumulation that was a key part of the fortunes of the middle class in 20th century America. But a basic income could be part of the remedy for the injustices he describes.

Coates’ article is a hard read. On his blog, he refers to himself as a failed academic, but it’s his journalistic rendering of the suffering of people like Clyde Ross who just tried to play by the rules and were repeatedly punished for it that make his piece so convincing. As a Northerner, I’ve often wondered why African-Americans who have the means to leave the South—a big qualifier, I know—would ever choose to stay. Coates’ account of treatment of African-Americans in Chicago is a well-deserved rebuke to the simplistic belief that racism is primarily a Southern problem.

If we are moved by the story Coates tells, what should we do? Coates argues for a national investigation into the legacy of slavery and its aftermath. This would be an important step—an airing of the evidence, and a collective embrace of our responsibility for our nation’s history. It’s hard to see how any specific proposal for reparations could be approved without an admission that harm was done. Other countries with similarly horrific histories have been able to move beyond them through this process of truth and reconciliation. If Germany and Israel, white and black South Africans, and Hutus and Tutsis can go through this process, Americans ought to be able to as well.

What about the reparations? Our judicial system relies heavily on the adjudication of specific claims between specific litigants. Should the descendants of individuals enslaved by a particular family be able to sue the descendants of that family, to recover all or a portion of any inherited wealth? Why not? But how would we compensate those whose family histories are less traceable, or recover wealth from those families whose fortunes have been lost or used up? What of the everyday gestures of humiliation and intimidation, or the millions of choices not to sell a home to an African-American family? How do we measure those?

As Coates’ makes clear, its impossible to fully separate the actions of the undeniably culpable from all the rest of us who profited from rising housing prices that benefited from keeping African-Americans out of white neighborhoods, or from good schools that segregated African-Americans from the whites. Slavery and ongoing violence and discrimination against African-Americans are a collective responsibility that demand a collective response, in addition to any particular claims that can successfully be made through a judicial system that, of course, continues to reflect the comparative advantages and disadvantages of whites and African-Americans in our society.

What would a collective form of reparations be? Brown University, which went through a truth and reconciliation process of its own, chose to respond to its historic ties to slavery through a number of educational programs to benefit African-Americans and school children in its hometown of Providence, RI. Other institutions might choose this form of in-kind reparation, but the power that was taken away from slaves, and from aspiring homeowners who were redlined, and from workers who were paid less because of the color of their skin, is economic power in the form of capital. And this is where a basic income comes in.

A universal basic income, together with progressive taxes on income, wealth, and inheritances, redistributes from those who benefit most from our social, economic, and political institutions, to those who profit least. Like accumulated capital, basic income provides a steady stream of income that supplements income earned from work. It provides an income floor, but not an income ceiling, so it doesn’t eliminate the rewards that come from education, hard work, or entrepreneurial savvy, but it limits the inheritance of economic inequality from one generation to the next.

A universal basic income might seem like a blunt instrument to address an injustice limited to a fraction of the current population. It is true that a basic income targets the poor regardless of race, ethnicity, and family history. It will go to whites, some of whom may be the descendents of slaveholders, and it will be effectively taxed away from prosperous African-Americans who are nevertheless descendents of slaves. But it will immediately and durably improve the lives and prospects of poor African-Americans, almost a third of whom live under the poverty line. It will address the economic injustices directed at poor Americans of other races as well, including those who are the victims of predatory labor practices.

While a basic income may not be enough to satisfy the demands of reparations for the specific injustices of slavery and its legacy, it is a step that equips those who continue to suffer from discrimination and predation today with the means to participate in the conversation. Poverty not only robs its victims of the ability to make economic choices but constrains their political participation as well. Raising African-American economic status through a universal strategy might well be a necessary step toward making a conversation about more targeted reparations politically possible.

Long-Term Effects of Income Supplements for Children

Excellent piece in the Times by Moises Velasquez-Manoff about a natural experiment on the effect of income supplements on the long-term mental health of Native Americans who received dividends from casino profits in North Carolina. Unsurprisingly, mental health outcomes were better for children whose families had received the dividends than for the control group of white children in the same area whose families were not entitled to tribal dividends.

The investigators, led by Jane Costello of the Duke University Medical School, had been following the children (both Native American and white) before the Eastern Band of Cherokee Indians began distributing dividends. This means they had an existing control group and had data on the control and experimental groups before and after the dividends were implemented.

Their first report was published in 2003. Their second report, published in 2010, followed the children into adulthood.

Alaska has a similar (though smaller) resource dividend from the sovereign wealth fund it established with oil royalties, but since the dividend goes to all state residents, there is no control group to measure the dividend’s effects against.

Costello’s findings provide support for the idea that an unconditional basic income, while expensive to implement, actually saves money in the long run by cutting social costs related to mental illness and substance abuse. They also provide support for including children in basic income schemes in countries like the U.S. that lack child allowances because, as I argued in Basic Income Studies, a basic income that goes only to adults is less efficient in targeting child poverty in single-parent families.