***Blogger's Note: This blog post features a guest columnist. My friend, Ryan Gilleland, provides a point of view on Guaranteed Basic Income and how it can affect the socioeconomic future of our nation. There will be an additional blog post in which Ryan and I discuss some of the topics he brings up in this article.***
By Ryan Gilleland
We, as a nation, are on an unsustainable path. The number of people who qualify for, and receive, welfare is on a constant annual rise. The amount of taxpayer money that the nation spends each year to fund these programs spirals higher and higher, yet we are not getting any closer to winning the “War on Poverty”. Non-Profits and Not for Profit charities are unable to shoulder more of the burden, and more and more previously well-to-do families are finding themselves falling into the poverty trap each and every year. Our elected leaders in Washington D.C. have been unable, or are unwilling, to put forth any reasonable policies that adequately address these rising concerns. Rather, they would prefer to spend the majority of their time wining and dining campaign donors and preparing for the next upcoming election to ensure that they remain in office and continue pulling in a sweet paycheck at the voter’s expense. The politicians in Washington do not work for us anymore, and neither do the corporations or special interest groups that fund them, but what if I told you that there was a way to change that? What if I said that there was a way to greatly reduce poverty nationwide and return power to the people while also simultaneously reducing wasteful, ineffective government spending and lowering our budget and debt?
First, a little about myself. I am not an expert in socioeconomic theory and I do not have a PhD. I am 32 years old, born and raised in the state of Georgia, and a graduate from Kennesaw State University’s School of Social Sciences with a B.A. in Geography. I am your average middle class American male who is fortunate enough to have a decent paying job and a group of friends that I can engage in conversations with where we openly discuss topics that range from politics, to religion, to culture and music and everything in between. My friends and I come from various walks of life and all have various academic, political, and religious backgrounds. This leads us to have some very insightful, and often spirited, debates on a very wide range of topics. One of the more popular topics that we debate fairly regularly is the topic of welfare, poverty, and the role of government therein. This has led to the development of many potential solutions to the socioeconomic challenges facing our country today, but I want to share with you one idea specifically that really got our group excited and that is the idea of a Guaranteed Basic Income (GBI). This idea has really caught the attention of all of my friends on both sides of the isle as it really appeases the desires of both: reducing government spending/waste and providing financial aid and mobility to the poor and underprivileged. In this article, I will attempt to explain the concept of a GBI through a short Q&A series.
What is a Guaranteed Basic Income?
A Guaranteed Basic Income is a payment that is made by a governing political body to every adult citizen, at regular interval periods, which allows the citizen to meet their basic needs and live frugally on. The amount of money this equates to would be re-evaluated annually, but would always be enough to provide for the individual’s basic human needs (food, water, shelter, and basic healthcare) with a small amount leftover to provide for some amount of variance.
How is the amount of the GBI calculated?
In 1969, there was an Income Maintenance Programs report that was conducted by the United States President’s Commission called “Poverty amid Plenty, The American Paradox”, and in it they detailed a Basic Income Proposal stating that they “propose providing a basic income of around $4,700 per adult and $2,900 per child. So, for a family of four, it would be around $15,200 annually.” If we were to take that model and compare the value of a single dollar in 1969 to the value of a dollar in 2014, that $15,200 in 1969 would be the equivalent of $98,400 in 2014, with a single adult guaranteed $30,430/year and each dependent of an adult adding an additional $18,770. So, a single mother raising one child would receive $49,200 annually, paid out in bi-weekly installments, which could be direct deposited into the recipient’s bank account.
How does someone qualify for a GBI?
Once a person who is a citizen by either birth or naturalization reaches the age of adulthood (18 in the US), has completed high school (or an equivalency exam) and has undergone a course, either in high school or through a government-provided course, on basic personal finance, that person would be eligible to apply for and receive a GBI from the US Government. Any adults with dependents who are under the age of 21 would also receive an additional amount of GBI equal to the amount necessary in order to provide for the basic human needs of those dependents.
What are the benefits of a GBI?
Once you get past the basics of explaining to someone what, exactly, a GBI is, they inevitably ask two questions: Why is it better than what we are doing now? And, how do you pay for it? We’ll look at the second question next, but first, let’s look at just a small handful of the potential benefits a GBI would provide to society.
First, under our current welfare system, whenever someone who is receiving government assistance gets a job, they either lose or greatly reduce most of their welfare benefits. This means that a person can go from not working at all to working a full week without seeing any real increase in income earning. This creates, in some, a disincentive to work, which leads to increasing levels of dependency on welfare assistance. Under a GBI system, whenever someone got a job they would continue to earn their GBI, but would also earn additional income through their salary. This would remove the disincentive to work that exists in the current welfare system.
A GBI system would also create a reduction in government bureaucratic oversight. Our current welfare system requires an extremely large number of workers to ensure that legitimate claims are being handled and false claims are being identified. All of these workers are being paid using tax dollars. Add to that the fact that the current welfare system and its various rules, laws, departments, and agencies are about as easy to understand as a lecture on quantum physics and it’s pretty easy to understand why it is just not sustainable. As the number of people who need assistance grows, so does the number of people necessary to keep it working. A GBI system would greatly reduce and simplify the system by replacing nearly all of these benefits, which would greatly reduce the necessary administrative costs. You no longer need to worry about identifying fraudulent claims because every adult citizen would be eligible to participate.
In addition to reducing government administrative costs, a GBI system would also reduce the need for government regulation on the labor market. Policies such as the highly debated minimum wage will become obsolete with the introduction of a GBI because people will already be given enough money to provide for their basic needs without having to work. This would allow businesses of all shapes and sizes to lower their labor costs by reducing wages for low skill, part-time work without preventing an employee from earning a livable wage. That doesn’t mean that all employers would start paying nothing though, on the contrary, a GBI system would actually return a large amount of bargaining power to the worker by granting the worker a basic level of economic freedom that doesn’t exist today.
In today’s society, many workers take whatever jobs they can find and/or qualify for because they have to do something in order to make enough money to live on. This ultimately results in widespread unhappiness among the working poor and middle class, who are working jobs that they hate in order to provide, and also places most of the bargaining power in the hands of the employers. In this system, the employer has all of the power because, without the employer, the worker has no income and must rely on complicated government assistance programs in order to meet their basic needs and suffer the societal stigma associated with them. In a GBI system, the worker would be guaranteed to have their basic needs met. In this system, the worker is no longer in a position where they must accept a job in which they are unhappy, underpaid, or unfairly treated in order to meet their basic needs. This will allow workers the ability to leave a job they are unhappy at in order to pursue something that interests them more, whether it is a job at a different company, returning to school to further their education, learning a new trade, or starting their own business, without having to also worry about earning enough to put food on the table or a roof overhead during that transition, and every workforce study shows that employees who are happy are much more productive and valuable to a company than employees who are unhappy.
Overall, the GBI system would lead to lower, more stable costs over time as it would not be subject to the significant fluctuations that the current welfare system has related to the economy, since the GBI would paid to all adults regardless of whether they are employed or not. This also means that lingering unemployment, whether it is related to economic hardship or to technological unemployment, will be easier to deal with as well, again, because every adult will be paid a GBI regardless of employment status. Other benefits include an increase in the number of small businesses, an increase in the amount of charitable work, financial independence for all adults, and increases the average citizen’s faith that their own government has their best interests in mind. It’s really a win-win for everyone.
How do you pay for it?
This is the second question that almost anyone will ask when they first hear about this potential new system. After all, if we can’t afford our current welfare system, then how can we possibly afford to give every adult a basic income without them having to work?
Well, for starters, just by simply reducing and eliminating the majority of current government welfare programs, you would generate almost enough in savings to pay for the entire system. President Obama’s 2015 budget has $2.56 trillion allocated for mandatory spending, which is used to fund social welfare programs such as food assistance, Medicare, and unemployment. Part of that is to provide the benefits and part of it is to pay the salaries of the administrators. This amount would nearly cover the entire cost of providing a GBI to each adult in the U.S. as of 2011. By 2028, the GBI system will cost $1 Trillion less per year than the projected costs of the current system.
The rest could be made up by closing tax loopholes, especially loopholes regarding Capital Gains taxes, simplifying the tax code so that everyone is paying a flat percentage of any additional non-GBI earned, and by levying taxes on high-end consumption and financial transactions. Other taxes could also be used to provide for this system, such as the Carbon Tax, which also has added environmental benefits. Basically, there are numerous ways that we can fund a program like this because the program itself is much more stable and economically responsible than the current welfare system as it exists today.
Wait, isn’t this Communism?
Communism is a revolutionary socialist movement to create a classless, moneyless, and stateless social order structured upon common ownership of the means of production. A GBI system is not revolutionary (it doesn’t require a revolution in order to happen), it is not predicated on the eradication of classes, it does not require the eradication of the state, and it doesn’t require common ownership of the means of production. Additionally, this system does not involve taking from the rich and giving to the poor because everyone is eligible to receive this benefit, not just the poor. In short, a GBI system defies every possible definition of the word Communism.
Why give money to the rich? Why not just give to the poor?
The main reason why we do not exclude the well-to-do from being able to participate in the program is that it completely removes the problem of the unemployment/poverty trap (mentioned above) where removing benefits from people as they start earning more means they do not increase their disposable incomes. Including everyone also greatly reduces the administrative costs and simplifies the scheme overall. Another benefit is that, with everyone participating equally, cutting the benefit would affect the rich and the poor equally, meaning that you will encounter less of the rich vs. poor scenarios where the poor feel like the rich are okay with cutting the poor’s benefits because it doesn’t impact them equally. Finally, anyone who falls into the rich category would still be paying more in taxes than they receive in their basic income, so the net outcome would be the rich are still paying while the poor benefit.
Why should I support this idea?
Depending on what ideology you subscribe to, the answer to this question could vary.
If you are a conservative, then I would point to the failures of our current welfare society. Sure, the current system is not the one you would have liked to have, but it’s been here for long enough that people have come to rely on it. Removing the current welfare system outright would be extremely disruptive to the whole of society, but while it may not be able to be removed, that does not mean that it cannot be reformed into something more effective and efficient. The current welfare system is an immense and expensive bureaucratic nightmare. It is prohibitively complicated, it creates incentives for people to avoid work and remain poor, and it arbitrarily allows various people to fall through the cracks. A GBI system should appeal to conservatives because it requires much less bureaucratic oversight, it treats all people equally, it retains all of the rewards of hard work, and it trusts the poor to make their own decisions regarding their money.
If you are a liberal, I would point out that a GBI system would alleviate many of the inequities and inefficiencies that are inherent in market capitalism. You would see a rise in the wages of unskilled and semi-skilled workers due to the fact that those who are good at that work and enjoy it would no longer have to compete against workers who are seeking such jobs out of financial necessity. The wages of high-skill workers would begin to decline as more workers are able to take time to gain the skills necessary in order to compete for these jobs. Job hunters will be able to take the time necessary to find a job that is a good fit for them, and entrepreneurship will benefit as those wishing to start their own businesses will now be able to without having to worry about generating a living wage while simultaneously trying to survive during difficult initial years of starting a new enterprise.
If you are a feminist, I would point to the fact that a GBI would free many women of financial dependence on any man. Women could afford to get out of abusive relationships in which their abusive husbands are also their financial supporters. Also, women would not be forced into dead-end jobs to make ends meet and would be empowered to pursue their own goals as they see fit, no matter what that entails.
No matter what camp you fall into, there are aspects to this idea that everyone can get on board with, and while it does not completely eliminate the government’s involvement in our social and financial lives, it does its very best to reduce it as much as humanly possible in our world today. I highly encourage everyone to do their own independent research on the topic of a Guaranteed Basic Income. There are numerous studies involving this system that have shown very positive results in the areas that they have been implemented, all of which can be found online, as well as numerous lectures, blogs, videos and media coverage related to the topic as well. The only way we are going to be able to make a positive change in the way our society is run is if we take the initiative to educate ourselves on the matter and then demand action from our elected officials.
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