Break the System: “Direct Giving, Less Crime, Less Poverty” (Part#2)

Angel D’Angelo
9 min readMay 25, 2020

Previously, I spoke about Federal Job Guarantees as one viable solution to reducing the problems we know as crime in our society. While important, the conversation leaves out chronically disabled folks who cannot work, people who are not able to work due to familial situations and does not address wage gaps. Employment alone cannot be the only economic tool in a viable society.

Universal Basic Income

A universal basic income is another tool that can be used to reduce or eliminate poverty — and as such, take out some of the impact of crime and crime victimization. Often, a universal basic income is thought to be in competition as an economic solution with federal job guarantee to the poverty problem. However, the two concepts can align together and provide benefits to society — especially with the growth of automation and the looming crisis of job elimination that comes with it.

Written by Matthew Keegan in 2018 for The Guardian, several accounts of the universal basic income pilot programs can be found. In his article Benefit or burden? The cities trying out universal basic income we see different impacts of the program where implemented. One participant spoke of the benefits the program has brought him psychologically, including dignity, as he is now able to afford the essentials. Many of the cities participating in the program believe that it will be more beneficial to the city budgets as well as the residents than the current existing social programs. The article also shows us that participants have a renewed sense of hope and that it even leads to entrepreneurship (self-employment), which can have positive impacts on innovation and local economy.

Universal basic income is a program designed to provide all citizens of a nation with a minimal basic income without condition or cause. In other words, it is a guaranteed amount of money paid to each resident just for being a resident. It is not conditional and has no means-test. Santens (2015) [14], a writer for the Huffington Post, wrote a very extensive and detailed argument in favor of a universal basic income in the United States. Santens believes that the universal basic income would start at $1,000 per adult citizen in the United States, which he based his number on the federal poverty line of $11,880 [15], which is just shy of $1,000 a month or $12,000 annually. Santens came to the table prepared to argue against the claim that this was reminiscent of “communist Russia”. According to Santens, Russia divided the resources of the country based on what the government thought the people needed. Universal basic income does not do this. Instead, it puts the buying power in the hands of the people and allows them to decide exactly how to use it, based on their own needs and wants. Universal basic income has been tested and it has provided some very positive and uplifting results. Project Namibia was a pilot program for universal basic income. Chung (2010) [16] provided some very important statistics about the success of this pilot program. According to her research, 42% of the children in Namibia were malnourished before the universal basic income program began. It was reduced to 10% after implementation.

Her research also indicated a higher level of participation in schools, a reduction of crime by 36.5% and a reduction of poverty from 86% to 68%.

Additionally, unemployment saw a jump from 60% to 45% and Namibia saw a wage increase of 29%, which does not include money from the universal basic income itself. Unlike the welfare system we have in the United States today, Namibia’s universal basic income encourages work, rather than discourages it, because it does not punish people for earning more wages. Because the universal basic income is unconditional and requires no means test, an individual will not be removed from the program due to earning higher wages. Stantens also cites Dr. Markman (2014) on the psychology of choice and motivation. Markman summarized that individuals who have options are more likely to be invested in the choices they make. In this example, an individual who works because they want to, rather than have to in order to survive, is more likely to be more invested in the work they do. Anderson (2014) [17] references a $27 billion dollar bonus that went to the wealthy wall street investor and personnel. According to Anderson, every $1 invested into a low-wage earner brings in $1.21 into the economy whereas every $1 invested in a high-wage earner brings in $0.39 into the economy. Based on this, Anderson found that had the $27 billion been invested into low-wage earners, it would have grown the economy by an impressive $32.3 billion, triple the actual 10.4 billion boost that was given as a result of the wall street bonuses. Norris, Kochhar, Tsounta (2015) [18] state that making the rich richer by even one percent will lower the gross domestic profit by 0.08% whereas making the poor and middle class richer by even one perfect will raise the gross domestic profit by 0.38%, which raises the growth prospect or the country. As such, Cooper [19] cites economist Thomas Piketty in stating that capital in its natural state does not trickle down but rather stays in the hands of an established few.

In summary, more money in the hands of the poor and middle class has a higher economic advantage than more money in the hands of the wealthy class. Namibia was not the only place to pilot a universal basic income structure. Standing (2014) [20] studied a pilot program in India. In this experiment, everyone within a village was provided with a universal basic income for 18 months and were compared to twelve similar villages that were not given any basic income.

The findings within the village with universal basic income, as cited by Standing, show improvements in child nutrition, health for adults and children, school attendance, sanitation, economic activity, earned income (wages) and socioeconomic status of vulnerable populations such as women, the elderly and the disabled.

The equity effects resulted in bigger improvements within the tribes and a better turn-out for the most vulnerable demographics. Additionally, economic activity and work/productivity increased. Many individuals also were able to buy themselves out of the bondage of debts. Arguing that the universal basic income would result in inflation, Standing states that this critique ignores the elasticity of supply. Standing states that universal basic income causes a sharp rise in production and as such reduces the prices of goods.

Stanten provided several sources for different models of increasing the revenue in support of this plan. Additionally, as mentioned before, monies placed in the hand of the lower and middle class increase the gross domestic profit by 0.38% whereas placing monies in the hand of the wealthy decreases the gross domestic profit by 0.08%. One of the many proposals to raise revenue for this program is a land value tax. Myerson (2013) [26] researched the land value tax and estimates that such would increase government revenue by $1.7 trillion. A land value tax is a tax on land which, as Myerson notes, is collectively belonging to the Earth. Economist Michael Hudson, according to Myerson, predicts that New York City alone, if taxed on land value, would raise more revenue for the government than all the plants and equipment in the entire country. Furthermore, Myerson believes that land tax will stimulate urban poverty without causing more gentrification. Myerson cites Cord (1985) [27], who based on 1981 data, believed the full land tax would increase revenue by $658 billion, which was equal to 28% of the national income. Parncutt (2011) [28] proposes a universal basic income tied with flat increase tax. In his scenario, unemployed individuals receive the basic income unconditionally and all existing social programs are depleted. The employed continue to receive the basic income, however, they would also pay a flat tax rate. Parncutt states this will end the welfare trap, in which people refuse to work, or work for less, in order to avoid the loss of their benefits. Furthermore, this universal income plan would end welfare fraud, since the universal basic income is given unconditionally, would remove tax evasion because a flat tax would remove tax refunding and would also end tax deductions. The Robin Hood Tax Organization [29] is a group dedicated to supporting a small tax of less than half a percent of all financial transactions. According to this organization, such a plan would generate hundreds of billions of dollars to the tax revenue. Senator Bernie Sanders [30] also proposed this plan, proposing specifically a 0.03% on financial transactions, estimating a revenue development of $852 billion within ten years. The Robin Hood Organization states that the financial transaction tax would have no effect on the everyday American and would apply to transactions involved in wall street, such as hedge funds, stocks, bonds, trades, derivatives and foreign currency exchange. The organization states such plans already exist in 40 countries, including Japan, the United Kingdom and Brazil. In the United Kingdom, they claim, this type of taxation brings in $4.7 billion dollars in revenue annually. Thiess of the Economic Policy Institute (2013) [31] proposes that an elimination of these tax loopholes on inherited stocks and bonds would raise $452 billion. Thiess also states that reforming the current tax rates for the highest earners would bring in $1.6 trillion in revenue and a tax on carried interest, treated as regular income, would bring in $21 billion in revenue. Furthermore, Thiess states that capping marginal tax rate on itemized deductions would bring in $513 billion in revenue. Thiess also supports an international corporate tax reform ($606 billion), progressive estate tax ($160 billion), financial transaction tax ($830 billion) and a carbon tax ($943 billion). Sanders proposes ending tax breaks for the oil, gas and coal industries, estimating a ten year revenue of $113 billion. He also supports the elimination of the 2001–2003 Bush tax cuts on the top earners. To add to sources of revenue, Harrington (2016) [32] cites Senator John McCain on the topic of wasteful federal government spending. Her article claims $27 billion was wasted by the federal government. Examples cited, referencing Senator McCain, include $5,000 to research the cartoon character Hello Kitty by the Department of Education, $1,048,805 spent to examine dog brains by the Pentagon through an MRI, $93,000 by the Department of Agriculture to study the potential of potatoes ability to become French fries, among other claims of waste by McCain. In other words, wasteful spending must be stopped in order to appropriately invest the money into the American citizens. While no single solution is specifically proposed to pay for this program, collective research shows that money is available to be utilized for the benefit of the American people. Remember, the universal basic income plan aims to eliminate the welfare systems that exist today. The United States Department of Agriculture (2015) [33] shows a cost of $69,655,468,659 in monies paid to welfare recipients using the Supplemental Nutrition Assistance Program, also known as food stamps. Similarly, $4,176,195,415 was used for the Special Supplemental Nutrition Assistance for Women, Infants and Children, otherwise known as WIC. The United States Treasury [34] indicates that approximately $88 billion was used to fund the current social security program in the fiscal year ending in 2015. Furthermore, the universal basic income program would also eliminate unemployment compensation, which through unemployment taxes brought in approximately $51,177,000.00, according to the Department of Treasury.

References:

[14] Scott Santens (2015)

http://www.huffingtonpost.com/scott-santens/why-should-we-support-the_b_7630162.html

[15] Families USA (2016)

http://familiesusa.org/product/federal-poverty-guidelines

[16] Debbie Chung (2010)

http://www.policyinnovations.org/ideas/briefings/data/000163

[17] Sarah Anderson (2014)

http://www.ips-dc.org/reports/wall_street_bonuses_and_the_minimum_wage

[18] Era Dabla-Norris, Kalpana Kochlar, Evridiki Tsounta (2015)

https://blog-imfdirect.imf.org/2015/06/15/growths-secret-weapon-the-poor-and-the-middle-class/

[19] Ryan Cooper (2014)

http://theweek.com/articles/448863/why-everyone-talking-about-thomas-pikettys-capitaltwentyfirst-century [20] Guy Standing (2014)

https://www.theguardian.com/business/economics-blog/2014/dec/18/incomes-schemetransforms-lives-poor [21] Peter Ferrara (2013)

http://www.forbes.com/sites/peterferrara/2013/06/23/welfare-state-doesnt-adequately-describehow-much-americas-poor-control-your-wallet/#775298ea1e2c

[22] Citation Removed — Not Used in Text

[23] Matt Zwolinnski (2013)

https://www.libertarianism.org/columns/libertarian-case-basic-income

[24] Ta-Nehisi Coates (2014)

http://www.theatlantic.com/magazine/archive/2014/06/the-case-for-reparations/361631/

[25] Movement for Black Lives https://policy.m4bl.org/reparations/ [26] Jesse Myerson (2013)

http://www.salon.com/2013/11/22/end_the_1_percents_free_ride_how_taxing_land_would_solv e_americas_biggest_problems/ [27] Steven Cord (1985)

http://www.jstor.org/stable/3486038?seq=1#page_scan_tab_contents

[28] Richard Parncutt (2011) http://www.parncutt.org/BIFT1.html [29] Robin Hood Organization

http://www.robinhoodtax.org/sites/default/files/Robin%20Hood%20Tax%20FAQ.pdf

[30] Senator Bernie Sanders http://www.sanders.senate.gov/top10 [31] Rebecca Thiess (2013)

http://www.epi.org/publication/options-exist-raising-revenue-smart-progressive/

[32] Elizabeth Harrington (2016)

http://freebeacon.com/issues/mccain-exposes-billions-government-waste/

[33] United States Department of Agriculture (2015)

http://www.fns.usda.gov/pd/supplemental-nutrition-assistance-program-snap http://www.fns.usda.gov/pd/wic-program [34] United States Department of Treasury (2015)

Other Issues

Federal Job Guarantee
Attainable Shelter
Universal Health Care
Decriminalize Drugs (Yes, even that one)
Decriminalize Sex Work

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Angel D’Angelo

I’m not an expert or scholar on anything. I mainly write for me. If others see it, and love it, great :)