Guaranteed income pilot programs are emerging throughout the state of California. The programs differ in who is selected and how much recipients get. None have strings attached.
The concept of a guaranteed income gained publicity during the 2020 elections, when presidential contender Andrew Yang made it a central part of his campaign. In California, additional exposure came from Michael Tubbs, who founded Mayors for a Guaranteed Income in June 2020, a coalition that advocates implementation of guaranteed income trials.
Three Sample Guaranteed Income Programs
Michael Tubbs, when mayor of the City of Stockton implemented one of the first guaranteed income pilot programs in the state, with great fanfare and a lot of private donations. The program gave $500 a month to 125 selected low-income residents and ran for two years (February 2019 to January 2021).
Oakland Mayor Libby Schaaff launched her pilot guaranteed income program in March 2021. The privately-funded program will give low-income families $500 per month, for 18 months. Families selected are of color, in an effort to close the racial wealth gap.
On April 19, 2021, Los Angeles Mayor Eric Garcetti, proposed a $24 million tax-payer funded one-year guaranteed income pilot program. The program will give $1,000 per month to 2,000 low-income families adversely affected by Covid-19.
The Selling Points
A guaranteed income, with no strings attached, given in addition to established public assistance programs takes aggressive selling in some communities. In Stockton, for example, Mayor Tubbs was not re-elected in spite of accomplishments. His defeat was in part (there were other adverse circumstances) because some of his constituents were not ready for agendas as progressive as a guaranteed income.
The promotional efforts are convincing, but debatable in some regards. Here is a sample of the press California’s guaranteed income programs have received, followed by clarifications that might be helpful.
- “The idea of the government providing poor residents with some basic level of income has been floated by a number of prominent people over the years, including civil rights leader Martin Luther King Jr., libertarian economist Milton Friedman and Republican President Richard Nixon.” L.A. could soon become the largest city in the U.S. to offer guaranteed income for poor residents.” L.A. could soon become the largest city in the U.S. to offer guaranteed income for poor residents, Fortune, April 19, 2021.
Martin Luther King criticized the existing welfare system as fragmented and designed to affect root causes of poverty, not mitigate poverty itself. He did propose a guaranteed income as remedy. However, his plan came with strings attached. Government needed to create “social good” jobs for individuals who the market economy left behind. Dr. King’s plan, therefore, differs from the current “no strings” proposals.
Milton Friedman proposed a negative income tax, not a guaranteed basic income. Under Friedman’s plan, people file their tax returns, and depending on their income level, they either pay taxes or receive cash from the government. Also, Friedman’s plan was intended to replace existing welfare programs not supplement them. Today’s guaranteed income plans require nothing of recipients and supporters intend to avoid cannibalizing other public assistance programs.
Richard Nixon introduced in 1969 The Family Assistance Program (FAP), which aimed to implement a negative income tax that would benefit working parents with household incomes under a certain level. Unlike today’s guaranteed income proposals, FAP had a work requirement that applied to most recipients (there were exceptions to mothers with small children at home). The proposal passed the House of Representatives, but failed in the Senate.
- “There’s a number of ways to pay for guaranteed income, from a sovereign wealth fund in which citizens benefit from shared national resources like the Alaska Permanent Fund, to bringing tax rates on the wealthiest Americans to their 20th century historical averages.” Mayors for a Guaranteed Income
Alaska’s principal source of revenue is crude oil. Residents receive an “oil dividend” from a natural resource that theoretically belongs to all residents. It might be difficult for California to come up with a comparable natural resource dividend.
California already has one of the highest tax rates in the nation. Several large employers have recently left California citing high taxes and high costs, among them California icons like Hewlett-Packard and Tesla. Texas and Arizona are among low or no-tax states that are happy to welcome California’s wealthy expatriates.
An objective of Mayors for a Guaranteed Income and others is to establish a federal guaranteed income program. The federal government can print copious amounts of money, redistribute revenue from low-spending to high-spending states, and does not need constituents’ approval to raise taxes. The only catch is that residents of low-spending states might not be happy with this plan.
- Preliminary analysis of Stockton’s guaranteed income program: “Results gathered from the first year, which spanned February of 2019 to February of 2020, found recipients obtained full-time employment at more than twice the rate of non-recipients. Recipients were less anxious and depressed, both over time and compared to the control group … Recipients had a greater ability to pay for unexpected expenses …” University of Tennessee, College of Social Work, March 5, 2021.
“Asian/Pacific Islanders and homeowners comprised a larger share of the debit-card recipients than of the control group , which could have biased the results…The study’s small sample and reliance on self-reported outcomes are bigger problems. It’s difficult to assess a statistically significant effect on employment among such a small group over a one-year period—from Feb. 2019 to Feb. 2020—especially given high labor-market turnover among lower earners.” Universal Basic Income Hype, Wall Street Journal, March 22, 2021.
The highly-promoted Stockton experiment is serving as a catalyst for the proliferation of guaranteed income trials in California. However, it is difficult to see how a study of 125 folks, among them homeowners, can apply to California’s large population of low or no-income residents.
The state of California has a poverty rate of 11% compared to lower-poverty states like New Hampshire at 4.9%. Also, California has the third largest rate of homelessness of all states in the U.S. (after New York and Hawaii).
Guaranteed income programs in California will prove expensive. Local and state jurisdictions will have difficulty finding sources of cash. The federal government, with its ability to create debt, would be a reasonable source, but would low-spending states be willing to subsidize high-spending states?
Lyndon Johnson’s expensive Great Society sounded wonderful, but nothing really got fixed. It will be worth carefully reading the fine print on guaranteed income programs.