Next year 100 Stockton residents will become lab rats in an experiment that – if it succeeds – could set off society’s concept of economics on its head. But if it fails, it will become an effective dagger to throw by those convinced entitlement programs often waste money.
The non-profit Economic Security Program is bankrolling a $1 million universal basic income (UBI) experiment. They will select 100 lower-income Stockton residents to receive $500 a month for 18 months for free to spend as they wish. No strings attached.
The concept is embraced by the likes of Mark Zuckerberg and Elon Musk who by their vast accumulation of wealth have significantly exacerbated income gaps in this country sometimes doing so with massive gifts of corporate welfare from the state and federal governments in the form of tax credits and tax breaks.
The UBI theory is simple. People are entitled to basics needs in life and if you give them that they will have the ability to better themselves such as go back to school or seek out vocational training to better improve their lot in life financially. And/or they may elect to use the extra money to cut back on working so they can invest more time with their children helping them succeed in school and ultimately reducing economic burdens on society whether its welfare, the cost of crime, treating substance abusers, or paying to incarcerate felons.
So why do a number of liberals such as Joe Biden take a dim view of the UBI concept that in its purest concept would give everyone enough money to meet basic needs such as food, shelter, and clothing? Biden and others believe it will promote many to abandon work per se while noting having a job is key to self-worth and social status. Multi-generational welfare families would seem to give credence to that view.
Others see UBI as a threat to existing entitlement efforts such as Supplemental Nutrition Assistance Program (SNAP) — the name bestowed on food stamps to make it more politically palatable. That’s because if UBI gets enough traction, they fear the long list of assistance programs to the poor would be thinned in order to finance a national UBI payment that some academics say needs to be at least $10,000 a year.
Their fear begs the question – how would we pay for a $10,000 annual payment even if it is just to the 39.7 million Americans living in poverty? It comes to $397 billion or a little more than a tenth of the existing federal budget. If you don’t cut entitlements to pay for it, a lot more in taxes would have to be raised which would increase the price of virtually every commodity.
Then there is the situational rationalization. Tax cuts, in their purest form, put more money back into the pockets of people. Yet we are told this is bad.
But if you reduced taxes of the low-income by $6,000 a year based on the $500 a month experiment in Stockton why wouldn’t that be just as effective? For starters that $500 a month in free money is going to cost those who receive it $598 in federal taxes when April 15 rolls around. That’s before Sacramento takes its cut.
If those who qualified for $500 a month got cards that exempted them from paying sales tax, cigarette tax, liquor tax, gas tax, and the new marijuana tax on what they bought as well as allowed landlords they rent from to be exempt from the pro-rated share of property taxes paid on their living quarters and pass that savings along via lower rent, you’d have a healthy chunk of change to spend on basics.
Going back to the 1950s, the minimum wage essentially wasn’t taxed. When California’s minimum wage hits $15 an hour, a full-time worker would gross $31,200 in a year putting a single person on the hook for $4,195 in federal taxes alone.
Minimum wage is sold as a livable wage to secure basic needs. So why not just exempt anyone making minimum wage from paying any state or federal income tax?
The answer is simple. One cannot social engineer without touching and controlling other people’s money.
By filtering money through the government you not only create bureaucratic employment but others are able to dictate how it is spent especially when it comes to entitlements that go beyond common national needs such as defense and transportation infrastructure.
The Zuckerbergs and Musks of the world argue UBI is needed because of all the jobs they are displacing in proportionate to the wealth they are accumulating. They don’t word it that way as it would imply they have guilt or at least complicity in creating poverty. Instead they say artificial intelligence or robots are displacing jobs making employment less likely at higher rates of pay.
Thank goodness Henry Ford, Andrew Carnegie, J.P. Morgan, Cornelius Vanderbilt, Leland Stanford, Charles Schwab, and the other original economic disrupters didn’t push for and get the government to implement a universal basic income to either assuage their guilt or indirectly underwrite the ability of consumers to purchase their products. We never would have had the tremendous spread of wealth in the United States during the 20th century nor what passes for poverty in the 21st century that is a far cry from a century ago when that meant no indoor plumbing, no safety net, no smartphones provided by the government, no access to healthcare, no television, and no access to a long list of things the poor have today.
This column is the opinion of Dennis Wyatt and does not necessarily represent the opinion of Morris Newspaper Corp. of CA.