The Shakeout Podcast – First 2 Episodes – Poverty and Universal Basic Income

The-Shakeout

Launched today, with Texas Public Radio, “The Shakeout,” in which we look at stuff that will be, or could be, different during these strange pandemic times.

TPR reporter Paul Flahive leads the Quixotic charge. I look to play a key Sancho Panza role.

People wait in their cars Thursday, April 9, 2020, at Traders Village for the San Antonio Food Bank to begin food distribution. The need for emergency food aid has exploded in recent weeks due to the COVID-19 coronavirus epidemic. The Labor Department said Thursday 6.6 million people applied for first time unemployment benefits.

Episode 1 is here – On Food Insecurity and Poverty

Episode 2 (featuring me) is here – On Universal Basic Income and other Income Experiments.

The_Shakeout

Please see related posts:

Universal Basic Income is Coming – Hopefully Permanently

UBI – That Radical Right Wing Idea

Cash Is Better Than Good Intentions

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UBI is Coming This Year – Permanently

As of this week we have the results from the Democratic primaries, and we have a surprise winner. I didn’t expect to say this, but tech entrepreneur Andrew Yang has run away with the 2020 Presidential election.

Andrew_yang
Mandatory Credit: Photo by John Locher/AP/Shutterstock (10532388f) Democratic presidential candidate entrepreneur Andrew Yang speaks at the Charles H. MacNider Art Museum during a campaign event, in Mason City, Iowa Election 2020 Andrew Yang, Mason City, USA – 21 Jan 2020

No, I don’t mean literally Yang becomes President next year, obviously. But his central, formerly kooky-sounding idea of Universal Basic Income (UBI) is about to become reality. With bi-partisan support. And more than that – I think it becomes permanent.

What the Trump administration and key Republicans Senators propose to pass in the next week or so – as a response to the COVID-19 crash – is an unconditional cash transfer to American adults. As of this writing, they are still debating the amounts and timing, but it all seems likely.  Maybe $1,000 per adult on April 6 and May 18th, according to a Bloomberg news report.

This cash transfer represents a previously-untried-in-the-US solution to alleviating the effects of a recession. For what it’s worth, it feels to me like exactly the right thing to do right now. The traditional “lower interest rates and let it trickle down” is insufficiently targeted to the people for example who face imminent poverty because their bar, restaurant, retail store, theater, or gymnasium where they work is either forcibly closed, or effectively closed, until the virus stops passing around.

As Americans, we think we’re opposed to transfers like this. We tend to think in shorthand like “bootstraps” and “no work, no pay.” But just as there are no atheists in foxholes, there are fewer libertarians in a pandemic-induced recession. Nobody is to blame when their restaurant-employer shuts indefinitely, by order of the city. People want to work, but they can’t. The only humane response is a bit of cash to cushion the blow until normalcy returns. 

So why do I think this one- or two-time cash transfer becomes permanent? For a bunch of virulogic, economic, and political reasons. 

I’m not an infectious disease expert (although I am married to one!) but I can imagine scenarios where we do not have the “all clear” signal to return to public places 3 months from now. Which means severe economic pain among households continues 3 months from now.

So, now follow my train of thought. Let’s say the COVID lockdown and recession continues for not just 3 months but 6 months to 12 months. Restaurants, bars, theaters, gymnasiums, stadiums, concert halls, and retail stores have to remain basically empty, either by law or by prudent health practice, to prevent the continued spread of the virus. Every shuttered business represents people who can’t afford to pay rent, pay the mortgage, or buy groceries. The pesky thing about food and shelter is that we all have to pay for it every single month. The federal government is going to have to make another unconditional cash transfer 3 months from now.

Alaska_Permanent_Fund

And then, if the virus continues to circulate among the population, another month after that.  Pretty soon we’re looking at a monthly, universal basic income. 

Why will it become permanent? Let’s look at the example of Alaska. And then Social Security.

For Alaska residents, a basic income check known as the Alaska Permanent Fund Dividend – recently around $1,600 per year – sure is popular. Even though oil revenue has plummeted, and the state can’t necessarily afford it, Alaskan politicians would not dare eliminate the dividend. It turns out – and you’re going to have to just trust me on this one – people tend to like free money.

There was a moment in time, in the mid-1930s, when Social Security looked to some people like a radical Socialist idea. Now, only paleo-conservatives find the idea of Social Security to be un-American.

So I bet by month 6 of this recession – just before elections – that a majority of Americans will have swung around to deciding that a universal monthly basic income is a comfortable and necessary thing.

Perhaps the biggest whiplash is happening among political leaders. 

How did the Republican Party suddenly become advocates for this unconditional cash transfer? 

Mitt_Romney

Trump undoubtedly has an instinct for what his key supporters want and need. A strong case could be made that the Rust-Belt swing state voters of Michigan, Pennsylvania, and Ohio who delivered Trump the electoral college victory in 2016 are eager for this type of economic lifeline. When you live in a manufacturing town, and manufacturing jobs are going overseas, a little monthly help goes a long way.

Trump – nominally a Republican – has an unorthodox approach to economic policy. Certainly he’s proved willing to reject the free-trade, open borders, global market approach of the Bushes and Romneys of his own party.

But then, Utah Senator Mitt Romney himself kicked off the cash transfer idea on the Republican side on March 16th by urging $1,000 be sent to every American adult.

Arkansas Senator Tom Cotton – a Republican with deep conservative bona fides – jumped in to support $1,000 payments for every American, introducing the idea that payments should be made monthly, as needed.

Embedded in Senator Cotton’s proposal, and his critique of existing measures, is the reason why conservatives might – and should – endorse cash transfers and UBI. Cotton said on Fox News that “we worry that the [already passed rescue] bill is setting up a new and complicated system relying on businesses giving paid sick leave and then getting a refundable tax credit that won’t move quickly enough and could give pressure on those businesses to lay workers off.”

To Cotton, and possibly other conservatives, unconditional cash transfers and the related idea of UBI have the huge advantage of simplicity. And simple means smaller government.

Charles Murray, a staunchly conservative intellectual, wrote in his book In Our Hands, A Plan To Replace The Welfare State that UBI represents a far preferable system to the patchwork of federal programs currently in place. 

It does not take a massive government infrastructure to send money transfers. Traditional welfare programs for households like SNAP and EITC require giant bureaucracies. Small business tax credits are complicated, and slow moving. UBI is easier than housing subsidies or unemployment checks. Faster than rent or mortgage freezes. If you squint your ideas a bit, the idea of trusting people to use money as they personally choose, rather than nanny-stating them around food, housing, and employment status, is a deeply conservative, small-government idea.

Tom_Cotton

I’m just saying, when conservatives like Cotton, moderates like Romney, and unorthodox Republicans like Trump unite around an economic idea that feels pretty lefty, you have the makings of a permanent feature of American life. 

I haven’t mentioned the Democrats yet. Senate Minority Leader Chuck Schumer has already argued that the one time cash transfer does not go far enough. “This is not a time for small thinking. A single $1,000 check would help someone pay their landlord in March. But what happens after that?” he said. 

New York Congresswoman Alexandra Ocasio-Cortez has weighed in with support, but not if it comes at the expense of existing social welfare programs. 

At the end of the day though, if given the chance to implement a permanent UBI, would Democrats support this idea? I don’t know, what do you think? Is the Pope Catholic? They are never going to allow Republicans to get to the left of them on this idea. 

The final matchup between Vice President Joe Biden and Vermont Senator Bernie Sanders has left neither candidate with a viable economic plan. Biden, because he never had any forward-looking ideas except to replace Trump. And Sanders, because his forward-looking idea of “Medicare For All” has precisely zero chance of implementation over the next twenty years. So that leaves Yang as the ultimate winner of the Presidential race, even if he’s not the one who will occupy the Oval Office next year.

Money_for_Nothing

“Money for Nothing” as Dire Straits used to sing. 

I bet nobody is as surprised as Yang that he won the war of ideas, far more quickly than he imagined. And further, I think he won this idea permanently. You read it here first. We’re getting UBI in the United States, starting this year, and we’re never going back.

A version of this post ran in the San Antonio Express News.

Please see related posts:

Cash is Better Than Good Intentions

UBI – That Right-Wing Idea?

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Cash Transfers and Hurricane Relief

rose_city_underwaterIn response to the extraordinary needs of their city after Hurricane Harvey, Houston philanthropists John and Laura Arnold first gave $5 million to the “Greater Houston Community Foundation’s Hurricane Harvey Relief Fund,” aka the “Mayor’s Fund.”

Following that gift, however, the couple made a second $5 million gift to an atypical organization named GiveDirectly one that had neither previously operated in the United States, nor had worked on natural disasters.

Through their philanthropy, the Arnolds are posing an important question – what’s the best way to deliver resources to a hard-hit community after a natural disaster like Hurricane Harvey? We won’t necessarily all agree, nor is there just “one way,” but it’s an important question to keep asking.

Before Harvey, GiveDirectly had only worked in East Africa. Their mission is to give money, unconditionally, to the most poverty-stricken people in the world. They don’t do “development work” the regular way by building clean-water wells, or houses, or hospitals, or give goats or chickens or food or clothing or solar-powered generators. They do “unconditional cash transfers” (UCT), and they trust the recipients know best how to use it to alleviate their own poverty.

GiveDirectly’s operation in Texas following Harvey is a test of whether that theory of “unconditional cash only, not stuff” could apply to disaster-relief in the United States.

As John Arnold explained to me, he and his wife’s thought process for supporting GiveDirectly was as follows:

First, the private sector can do a great job with the logistics of delivering needed goods and services to Texans, even in the face of catastrophic flooding, as occurred following Harvey. He marveled at watching ten fully-stocked Wal-Mart tractor trailers arriving early after the rains, ready to supply Houstonians.

give_directlySecond, the missing piece for many people hurt by the storm is simply: money. Wal-Mart, Arnold reasoned, will figure out how to provide the right stuff, as long as people have money in their hands to pay for that stuff.

Third, the best relief is probably a group that can just deliver money into the hands of people who need it.

“Everybody’s highest priority is different,”

Arnold told me.

“Some people’s car was damaged and they can’t get to work. Others had their work interrupted and they just need temporarily help to cover next month’s rent.”

So the Arnolds chose GiveDirectly for their $5 million.

Funded by the Arnolds and other donors, GiveDirectly set up a plan to deliver pre-loaded Visa debit-cards with a $1,500 value to impacted households in Texas. In Rose City, a badly-flooded town next to Beaumont that I wrote about last week, GiveDirectly arrived in October to deliver $1,500 to each one of the estimated 210 households, without conditions.

Rose City Mayor Bonnie Stephenson confirmed working with GiveDirectly to reach substantially all households in her town, holding town meetings and community gatherings to help get the word out. GiveDirectly reports successfully distributing 180 cards to the intended 210 households, according Catherine Diao, Communcations Lead for the organization.. In a few households, says Diao, they simply could not locate eligible recipients despite multiple efforts to do so.

Laura_john_arnold
Laura & John Arnold

GiveDirectly next expanded its giving to the Lakewood area of Northeast Houston. As of now they have handed out and estimated total of 1,200 pre-loaded cards of $1,500 each, with the intention of distributing up to 3,000 total.

Their methods are still evolving. In Rose City, the cards were meant to be “universal,” meaning that everyone with a household address in town qualified for the funds. In the Northeast section of Houston, GiveDirectly is attempting to target the $1,500 pre-paid Visa cards to only those who have demonstrated property losses.

As John Arnold explained, a classic problem of relief is to design a system that is restrictive enough to prevent fraud, but not overly restrictive that it prevents delivery of resources. It’s safe to say no system is perfect.

The normal model of disaster relief is that a combination of the federal government (primarily FEMA), big organizations like the Red Cross, and state and local officials coordinate major resources, while more locally-focused groups fill in the gaps with stuff at hand, like food, water and blankets.

Problems plague each of these responses, of course. One recurring problem with the smaller “stuff at hand” solution is that the stuff may not reflect what people actually need most, at any given time. The appeal of UCT is that recipients decide exactly what they need, not donors.

At the larger scale, FEMA and Red Cross have far more capacity than local groups to deliver resources. But one recurring complaint about the bigger organizations is whether the big infrastructure and big dollars are efficiently spent. In addition, qualifying for substantial FEMA grants, or even $400 Red Cross payments, involves engaging with a bureaucracy that may seem confusing or overly strict, a bundle of “red tape,” to use a word I heard repeatedly from folks in Rose City, including Mayor Stephenson. GiveDirectly’s attempt with UCT is to make delivery simple.

GiveDirectly, by their own estimation, regards their efforts in Texas as exploratory, but in line with their dual purpose of giving relief and pushing for more efficiency among relief organizations.

As President and co-founder of GiveDirectly Michael Faye wrote me,

“Recipients prefer cash and are frustrated with the opacity and efficiency of the traditional options, and want a direct giving alternative. With donors wanting it, and recipients preferring it, why shouldn’t it exist? At worst, it’ll help people rebuild their lives, and at best, it will force a conversation and potentially shift the [philanthropic] sector.”

John Arnold also explicitly called out the dual purpose of his gifts. First, there’s the charitable reason, which he defined as just providing help to people in Texas who need it the most. Second, there’s the philanthropic reason, which he defines as attempting to be thoughtful about solving problems at their root causes. The combination of charity and philanthropy, I gathered from our conversation, is why GiveDirectly appealed to him and his wife.

 

See related posts:

The Populist Approach to Hurricane Relief

The Red Cross and Other Disasters

GiveDirectly and Unconditional Cash Transfers

Universal Basic Income – A Radical Right Wing Idea?

 

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UBI – That Radical Right-Wing Idea?

basic_incomeLast week’s post — on a poverty eradication experiment in Africa of giving no-strings-attached cash — was a bit of a Trojan horse for this week: UBI is the idea of granting all adults a small amount of income, for life.

UBI is having a moment right now. Finland launched an experiment in 2017 to address joblessness with basic income, and the Netherlands is also attempting small-scale trials. Swiss voters rejected it in a referendum in 2016, but Swiss UBI supporters rejoice that it at least came up for a vote. A Silicon Valley startup Y-Combinator plans to launch a basic income experiment in Oakland, California, this year.

Futurists see UBI as the solution to the automation problem, when robots eliminate all of the human jobs. 1


The best advocate in the United States for UBI that I’ve read is Charles Murray, in his 2016 version of his book “In Our Hands: A Plan to Replace the Welfare State,” in which he calls for a universal basic income of $13,000 for every adult in the United States. Somewhat to my surprise, I found his book, and the ideas, very compelling.

Is Charles Murray a fellow traveler of Bernie Sanders, attempting to socialize America with his plan for free money? No. Actually, he’s just the opposite. He is a hard-core Libertarian, opposed to big government. In his version, UBI is meant to replace the welfare state built by President Franklin D. Roosevelt’s New Deal of the 1930s and President Lyndon B. Johnson’s Great Society programs of the 1960s.

Murray’s unexpected advocacy is what got me intrigued enough to read his book.

Charles Murray first came to wide academic prominence in the 1990s with his controversial book “The Bell Curve,” which placed him somewhat to the right of Attila the Hun on the political spectrum. Why, I wondered, would a right-wing guy propose UBI?

Murray’s idea, briefly, is this:

charles_murrayEvery American 21 years or older would receive a $13,000 annual stipend, of which the first $3,000 must be dedicated to catastrophic health insurance.

As a Libertarian, Murray believes that giving recipients a choice of how to spend their money, rather than relying on a massive federal bureaucracy to control choices and incentives over housing, nutrition and work will improve the lives of people in poverty.

Although the UBI would cost $2.58 trillion per year (in 2014 dollars), Murray points out that our welfare infrastructure, as currently constituted, costs $2.77 trillion per year (also in 2014 dollars.), offering the federal government — and therefore, U.S. taxpayers — savings from UBI from the start.

Murray makes the interesting point that for people in poverty — in particular unwed mothers or unemployed young men of working age — a guaranteed income suddenly changes certain incentives. Those incentives, he argues, could address the roots of endemic poverty.

Murray speculates that UBI could directly benefit single mothers, for example, by providing a guaranteed source of income even if they cannot join the workforce while caring for a child. In addition, the fact that a child’s father receives a guaranteed income — easily tracked through a known bank account — would greatly aid collection of mandatory alimony payments. Murray further speculates that unemployed working-age men who might have previously lived for free with a relative or girlfriend may suddenly find themselves forced to pay rent, as they have known sources of cash.

A UBI could increase labor mobility for people who would like to move to where jobs are more plentiful, but do not have enough financial cushion to take the risk of relocation. Although $10,000 in available annual income is not very much money for any individual, when pooled by cooperative adults it could also serve as a boost to solve collective housing needs.

The long-term benefits of UBI remain speculative because only short-term and small-scale experiments have ever been tried in the United States — the largest being a 1970-1980  experiment in Seattle and Denver, with 4,800 participants. It produced data and policy directions thatresearchers found inconclusive.

Look, I know that it’s incredibly easy to criticize UBI. Just twenty seconds of thought gets me the following word salad:

  1. Politically untenable
  2. Disincentive to work hard, or work at all
  3. You might snort money-for-nothing straight up your nose
  4. Without necessity, where is the invention?
  5. Higher taxes
  6. Now we’ll REALLY need a wall
  7. Replacing some or all our social safety net programs at once sounds scary
  8. Is $13,000 the right amount?

I’m sure you will be able to come up with additional objections in another twenty seconds, and we’d probably agree on those as well.

robots_for_basic_incomeInterestingly, in the United States UBI receives the harshest criticism from the left.

Robert Greenstein, an advocate for traditional Democratic Party-sponsored programs to reduce poverty, came out strongly against UBI last year, calling it both politically unrealistic and a distraction from programs such as subsidized housing and minimum wage increases. Roosevelt Institute fellow Mike Konczal has argued that Libertarian claims of a bloated welfare state obscure the important work that social programs accomplish. Bernie Sanders has been asked repeatedly about UBI but always expresses a preference for “basic standard of living” policies rather than “basic income.”

Personally, I find the idea that people in poverty could be trusted with no-strings cash highly compelling, when compared with the complex alphabet soup of federal programs, including SNAP, Section 8, TANF and EITC. We should pay attention to poverty-relief experiments with direct cash payments in Africa, as they may do better than targeted programs that attempt to control the behavior of people in poverty.

In the face of financial dysfunction and the persistence of poverty — despite our great national wealth — we ought to be able to have a conversation about speculative and interesting ideas to address poverty.

 

A version of this ran in the San Antonio Express News and Houston Chronicle.

 

See related posts:

Cash Transfers in Africa

Inequality in America – the Washington Post Map

Video: Inequality in America

 

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  1. Except finance blogging, obviously, which can never be automated. It is too essential and too creative to ever fall prey to Skynet.