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Guaranteed Income: High Hopes and Unplanned Consequences

The idea has come up again and again, and now there’s a flurry of experimentation. But it never seems to take hold.

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Andrew Yang made a broad-based income stipend the focus of his high-profile campaign for mayor of New York City and, before that, of his campaign for the Democratic presidential nomination. (Photo by Michael M. Santiago/Getty Images/TNS)
(Michael M. Santiago/Getty Images/TNS)
There are two notable things to say about schemes for guaranteed or universal basic income in this country. One is that they have been around for well over two centuries. The other is that they have gone almost nowhere in all that time.

Thomas Paine began beating the drum for a guaranteed income back in 1797. “It is wrong to say God made rich and poor,” Paine wrote. “He made only male and female; and he gave them the earth for their inheritance.” The only solution to artificial inequality, he declared, was for government to provide each citizen with enough money to live on.

Since then, the movement has been notable for attracting famous names rather than actually generating money. Martin Luther King Jr. advocated a guaranteed income; so did the libertarian economist Milton Friedman. So, in his own way, did President Richard Nixon. Nixon, assisted by his policy adviser Daniel Patrick Moynihan, almost steered a modest plan through Congress in 1972. But nothing was ever enacted.

In the past five years, however, the drive for a broad-based income stipend has forced its way into public consciousness more systematically than ever before. Andrew Yang made it the focus of his high-profile campaign for mayor of New York City and, before that, of his campaign for the Democratic presidential nomination. Michael Tubbs, the former mayor of Stockton, Calif., became a national media figure after he initiated a pilot income program in his city. And now the federal government is involved: President Biden’s economic recovery plan, passed by Congress in February, contains a child tax credit that advocates and critics alike seem to view as at least a stepping stone.

In addition to Stockton, a diverse array of cities around the country has begun playing with the idea. Tacoma, Wash., has arranged to provide 100 needy families $500 a month for a year. Newark, N.J., plans to offer 400 poor residents $6,000 a year for two years. California Gov. Gavin Newsom has budgeted $35 million for local communities to use in designing guaranteed-income pilot programs over the next five years. Denver is experimenting with a program in which 260 people will receive direct payments of $1,000 a month, while others will be given an initial lump sum. An organization called Mayors for a Guaranteed Income has signed up 53 local chief executives as members.

That’s a lot of action. But before we declare that the age of guaranteed income is finally at hand, two stubborn realities need to be pointed out. One is obvious: Everything being tried at the moment is very small. Some of these efforts may lift a fair number of their chosen recipients out of poverty, at least for a while, but they don’t come close to suggesting a broad-scale remedy. The other reality is that almost all of them (Newsom’s excepted) are funded by private philanthropy. There just isn’t enough private money out there to take them a great deal further. And the costs of a publicly funded permanent income stipend are staggering.

MOST PEOPLE ARE STILL CONFUSED about the difference between a guaranteed income and a universal basic income. It’s a simple but vital distinction. A universal basic income is a stipend presumed sufficiently generous to give citizens at all economic levels enough money to live a decent life. A guaranteed income is targeted to the poor. Most of the academic theorists who have played this game in recent decades have been on the universal side. There’s a clear reason for that: These advocates don’t just want to relieve poverty — they want to dismantle the vast bureaucracy that goes along with conventional social welfare programs, including not just traditional cash aid to needy families but Medicaid, disability benefits and perhaps Social Security as well.

This is what Milton Friedman had in mind, and it is what Charles Murray revived with his 2005 book, In Our Hands. But it is not what most of the current experiments and proposed schemes are aiming at. The Stockton experiment gave residents $500 a month, no strings attached, but they had to be below the city’s median income level. Mayor Tubbs has claimed impressive results for this initiative, small as it was. He reports that after a year 43 percent of the participants were working full or part time, and that 40 percent of the stipend was used to pay for necessities such as food, not alcohol or video games. Some 11 percent of recipients used the money to help care for parents or children.

But a guaranteed income targeted to the poor has always had its critics, and they have been powerful ones. President Franklin Roosevelt never liked the idea of helping only the poor; he thought doing that would not create a large enough political constituency to keep a plan afloat. That’s why Social Security has always gone to everyone over the threshold age. President Lyndon Johnson was terrified of anything that could be stigmatized as a “dole”; he also thought structured social programs sold as a War on Poverty would be more palatable to the American electorate. But LBJ’s War on Poverty still ended up handing out dole-like unconditional payments to millions of poor people, notably unmarried teenage mothers.
It was the widespread societal resentment of this system that led to the 1996 federal welfare law, imposing strict work requirements and five-year time limits on payments to needy families. That law did provide some impressive short-term benefits. Welfare rolls declined in almost every state; a large share of previous welfare recipients did find jobs; child poverty actually went down in many places. But the successes began to erode in just a few years. Most of the jobs that came out of the reform did not last long; a significant percentage of the former recipients ended up as poor as ever.

The Great Recession that started in 2008 raised serious doubts about just what welfare reform had accomplished, and revived debates in many quarters about reconsidering some form of guaranteed or universal basic income as an alternative. The coronavirus outbreak in 2020 resulted in a profusion of news stories about hard-working, poorly paid Americans who were out of jobs and destitute through no fault of their own.

SUCH WAS THE TENOR OF DEBATE when a new and progressive Democratic administration took office in Washington this past January. The Biden White House didn’t talk about guaranteed or basic income, but the American Rescue Plan, signed into law in March, provides a massive one-year expansion of the child tax credit for the 2021 tax year. The credit for 2021 goes from $2,000 to $3,000 for most children, and $3,600 for children 5 years old and younger. There are no strings on use of the money. It’s a targeted benefit, but the ceilings are high — married couples earning $150,000 in joint income still get something. And single mothers qualify just as married parents do.

Whether this program will continue beyond its first year remains a question, but it is dramatic enough to lead some guaranteed-income advocates to declare that this is the first step toward a permanent stipend. Critics think so, too.

All of this raises the fundamental issue in any serious discussion of a guaranteed or basic income: the balance between a commitment to help children and a demand for some demonstration of personal responsibility on the part of those who are getting the money. By definition, the more generous the stipend, the less you are asking of the poor. This is the fundamental societal fault line in any dispute over a no-strings benefit, and it always will be.

But there is an even more fundamental question underneath that one: Does long-term poverty simply reflect an unfortunate absence of cash, or is it the result, at least in part, of personal behavioral problems? In hard economic times such as those of 2008 or 2020, public opinion tilts toward the economic explanation. But it tilts back when conditions improve, no matter how much inequality is present in the society.

Or to put it in more concrete terms, will people still want to work if you hand them enough money to live on? Decades of research have provided a general answer: The vast majority of Americans would rather have jobs than sit home, cash checks and play video games.

But the problem is more subtle than that. Many of our middle-class comforts, and a large share of the American economy, are dependent on tedious low-wage service work that most of us would rather not do — housecleaning, lawn maintenance, nursing-home care, restaurant kitchen chores and a host of others. It’s not that people in those occupations wouldn’t want to work if they had a guaranteed income; it’s that they might balk — quite reasonably — at doing those sorts of jobs for meager wages.

If millions of them chose to live on the stipend instead, there would be a couple of virtually immediate results, as The New York TimesEzra Klein and other commentators have suggested. Either stores, restaurants and nursing homes would face a serious worker shortage, or they would have to raise wages substantially and increase costs to the consumer. The comfortable life that so many of us enjoy on the strength of low-wage service employment might well be endangered either way.

That doesn’t necessarily mean that a guaranteed income is a bad idea for American society. It is just a warning to beware of unplanned consequences — even ones that shouldn’t be very difficult to predict.
Alan Ehrenhalt is a contributing editor for Governing. He served for 19 years as executive editor of Governing Magazine. He can be reached at ehrenhalt@yahoo.com.
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